2003 british columbia financial and economic …...6 chapter 1 — economic review 2003 financial...

2003British Columbia

Financial and EconomicReview

63rd Edition(July 2003)

http://www.gov.bc.ca/

Ministry of Finance

Table of Contents

ii Table of Contents

2003 Financial and Economic Review — July 2003

Introduction........................................................................................................................................................................... 1

General description of the Province ....................................................................................................................... 2Geography ................................................................................................................................................................ 2Physiography............................................................................................................................................................ 2Climate and Vegetation......................................................................................................................................... 2

Chapter One — Economic Review ................................................................................................................................ 5

2002 Overview ................................................................................................................................................................ 6

External Environment ................................................................................................................................................... 6U.S. Economy........................................................................................................................................................... 7Canadian Economy ................................................................................................................................................ 7International Economy ......................................................................................................................................... 7Financial Markets .................................................................................................................................................... 7

British Columbia Economy ......................................................................................................................................... 9Real GDP ................................................................................................................................................................... 9Capital Investment.................................................................................................................................................. 9Exports ....................................................................................................................................................................... 10Population and Labour Force Characteristics............................................................................................... 12Labour and Income Developments ................................................................................................................. 13Prices and Wages .................................................................................................................................................... 13Consumer Expenditure and Housing.............................................................................................................. 14

Industrial Structure and Performance ..................................................................................................................... 15

High Tech .................................................................................................................................................................. 16

Tourism ...................................................................................................................................................................... 17

Topic BoxesEnergy in British Columbia ................................................................................................................................. 18B.C.’s Economic Development Initiatives...................................................................................................... 20

Charts

1.1 Canadian and British Columbia economic growth........................................................................ 61.2 External economic growth ..................................................................................................................... 81.3 Short-term interest rates .......................................................................................................................... 81.4 British Columbia GDP by component ............................................................................................... 91.5 Exports by market, 2002 ......................................................................................................................... 101.6 Key commodity prices ............................................................................................................................. 111.7 British Columbia population by age and sex, 2002 ...................................................................... 121.8 Building permits by activity ................................................................................................................... 141.9 Service industries in British Columbia ............................................................................................... 151.10 Trends in high technology employment in B.C. ............................................................................ 161.11 B.C. Tourism industry .............................................................................................................................. 17

Map 1.1 Net interprovincial and international migration in B.C........................................................ 12

Tables

1.1 British Columbia Population and Labour Market Statistics ........................................................ 13

1.2 Price and Earnings Indices ..................................................................................................................... 14

Table of Contents iii


Appendix 1 — Economic Review ................................................................................................................................... 21

Tables

A1.1 Summary of Economic Activity for British Columbia ................................................................ 22A1.2 British Columbia Real GDP at Market Prices, Expenditure Based........................................ 24A1.3 British Columbia GDP at Basic Prices, by Industry.................................................................... 24A1.4 British Columbia GDP, Income Based ............................................................................................ 25A1.5 Employment by Industry in British Columbia.............................................................................. 26A1.6 Capital Investment by Industry.......................................................................................................... 27A1.7 British Columbia International Goods Exports by Major Market and

Selected Commodities, 2002 ........................................................................................................ 28A1.8 British Columbia International Goods Exports by Market Area, 2002 ................................ 29A1.9 Historical Commodity Prices (in U.S. Dollars) ............................................................................. 30A1.10 British Columbia Forest Sector Economic Activity Indicators ................................................ 31A1.11 Historical Value of Mineral, Petroleum and Natural Gas Production .................................. 32A1.12 Petroleum and Natural Gas Activity Indicators ............................................................................ 32A1.13 Supply and Consumption of Electrical Energy in British Columbia .................................... 33A1.14 British Columbia High-Technology Sector Activity .................................................................... 34

Chapter Two — Financial Review.................................................................................................................................. 35

2002/03 Overview.......................................................................................................................................................... 36

Consolidated Revenue Fund Revenue ................................................................................................................... 38

Consolidated Revenue Fund Expense.................................................................................................................... 39

Crown Corporation Results ........................................................................................................................................ 45

Full-Time Equivalents (FTEs)..................................................................................................................................... 49

Provincial Capital Spending ....................................................................................................................................... 49

Provincial Debt ............................................................................................................................................................... 50

Credit Rating .................................................................................................................................................................... 53

Debt Indicators ............................................................................................................................................................... 53

Topic BoxMinisterial Accountability Report ...................................................................................................................... 44

Tables

2.1 2002/03 Operating Results ..................................................................................................................... 362.2 Summary of Changes from Budget 2002/03 .................................................................................... 372.3 Revenue by Source — Consolidated Revenue Fund .................................................................... 402.4 Expense by Ministry — Consolidated Revenue Fund .................................................................. 412.5 Contingencies and New Programs (All Ministries) Vote — 2002/03....................................... 432.6 Government Restructuring — Consolidated Revenue Fund ...................................................... 462.7 2002/03 Crown Corporation and Agency Operating Results..................................................... 472.8 Full-Time Equivalents (FTEs) Utilization........................................................................................... 492.9 Capital spending ........................................................................................................................................ 502.10 Provincial Debt Summary ....................................................................................................................... 512.11 Summary of Debt Changes from the 2002/03 Budget ................................................................. 522.12 Reconciliation of Summary Defi cit to Debt Increase — 2002/03 ............................................ 522.13 Interprovincial Comparison of Credit Ratings, June 2003........................................................... 532.14 Key Debt Indicators .................................................................................................................................. 54

iv Table of Contents


Appendix 2 — Financial Review..................................................................................................................................... 55

Government’s Financial Statements......................................................................................................................... 56

The Financial Cycle ....................................................................................................................................................... 57

Capitalization ................................................................................................................................................................... 59

Unfunded Pension Liabilities ..................................................................................................................................... 60

Adjustments to the Accumulated Defi cit ............................................................................................................... 60

Charts

A2.1 Summary Financial Statements Components .................................................................................. 57A2.2 Financial Planning and Reporting Cycle........................................................................................... 58

TablesA2.1 Effects of Capitalization on the Summary Accounts................................................................. 60A2.2 Summary of Changes in Accumulated Defi cit from the

2001/02 Public Accounts Reported Balance ....................................................................... 61A2.3 Five-Year Operating Results ............................................................................................................. 62A2.4 Summary of Changes from the 2002/03 Third Quarterly Report

Updated Forecast........................................................................................................................... 63A2.5 Five-Year Statement of Financial Position ................................................................................... 64A2.6a Five-Year Revenue by Source — Consolidated Revenue Fund........................................... 65A2.6b Five-Year Dedicated Revenue Collected on Behalf of, and Transferred to,

Crown Corporations and Agencies, and Other Entities .................................................. 66A2.7 Five-Year Revenue by Source — Supplementary Information —

Consolidated Revenue Fund ..................................................................................................... 67A2.8 Five-Year Expense by Function — Consolidated Revenue Fund ....................................... 68A2.9 Five-Year Expense by Function — Supplementary Information —

Consolidated Revenue Fund ..................................................................................................... 69A2.10a Government Restructuring Exit Expense ..................................................................................... 70A2.10b Consolidated Revenue Fund Government Restructuring Expense, 2002/03 .................. 71A2.11 British Columbia Buildings Corporation Five-Year Income Statement ............................. 72A2.12 British Columbia Ferry Corporation Five-Year Income Statement ..................................... 72A2.13 BC Transportation Financing Authority Five-Year Consolidated

Statement of Income .................................................................................................................... 73A2.14 British Columbia Hydro and Power Authority Five-Year Income Statement.................. 73A2.15 Liquor Distribution Branch Five-Year Income Statement ...................................................... 74A2.16 British Columbia Lottery Corporation Five-Year Income Statement .................................. 74A2.17 British Columbia Railway Company Five-Year Income Statement ..................................... 75A2.18 Insurance Corporation of British Columbia Five-Year Income Statement ....................... 75A2.19 Five-Year Provincial Debt Summary .............................................................................................. 76A2.20 Five-Year Provincial Debt Summary — Supplementary Information ................................ 77A2.21 Summary of Changes from the 2002/03 Third Quarterly Report

Updated Forecast — Capital Spending and Debt ............................................................. 78A2.22 Historical Summary Accounts Surplus (Defi cit) ........................................................................ 79A2.23 Historical Revenue by Source — Consolidated Revenue Fund .......................................... 80A2.24 Historical Expense by Function — Consolidated Revenue Fund ....................................... 81A2.25 Historical Provincial Debt Summary.............................................................................................. 82A2.26 Provincial Taxes (as of July 2003) .................................................................................................. 83A2.27 Interprovincial Comparisons of Tax Rates for 2003................................................................. 86A2.28 Summary of Major Tax Changes Announced in 2003............................................................. 87

Table of Contents v


Appendix 3 — Constitutional Framework ................................................................................................................... 89

Constitutional Framework........................................................................................................................................... 90

Provincial Government ............................................................................................................................................... 90Legislature ................................................................................................................................................................. 90Executive ................................................................................................................................................................... 90Judiciary ..................................................................................................................................................................... 91Provincial Government Jurisdiction ................................................................................................................. 92

Introduction

2 Introduction


General Description of the Province

British Columbia is located on Canada’s Pacifi c coast, and has a land and freshwater area of 95 million hectares. It is Canada’s third largest province and comprises 9.5 per cent of the country’s total land area.

Geography

The province is nearly four times the size of Great Britain, 2.5 times larger than Japan and larger than any American state except Alaska. BC’s 7,022-kilometre coastline supports a large shipping industry through ice-free, deep-water ports. The province has about 8.5 million hectares of grazing land, 1.8 million hectares of lakes and rivers, and 950,000 hectares of agricultural land that is capable of supporting a wide range of crops.

Physiography

BC is characterized by mountainous topography, but also has substantial areas of lowland and plateau country. The province has four basic regions, a northwesterly trending mountain system on the coast, a similar mountain system on the east, and an extensive area of plateau country between the two. The northeastern corner of the province is lowland, a segment of the continent’s Great Plains.

The western system of mountains averages about 300 kilometres in width and extends along the entire BC coast and the Alaska panhandle. The Coast Mountains contain some of the tallest peaks in the province. The western system includes the Insular Mountains that form the basis of Vancouver Island and the Queen Charlotte Islands. These islands help to shelter the waters off the mainland coast of BC, which form an important transportation route for people and products.

The interior of the province is a plateau of rolling forest and grassland, 600 to 1,200 metres in average elevation. North of Prince George the interior becomes mountainous, but plateau terrain returns just south of the Yukon boundary in the area drained by the Liard River. The southern interior’s water system is dominated by the Fraser River, which has a drainage area covering about one-quarter of the province. The Rocky Mountains, in the eastern mountain system, rise abruptly on the southern BC-Alberta boundary and are cut by passes that provide dramatic overland transportation routes into the province. The Rocky Mountain Trench lies immediately to the west of the Rockies. This extensive valley, the longest in North America, is a geological fault zone separating different earth plates. It is the source of many of BC’s major rivers, including the Peace, Columbia and Fraser.

Climate and Vegetation

Coastal BC has abundant rainfall and mild temperatures associated with a maritime climate. The Pacifi c coast has an average annual rainfall of between 155 and 440 centimetres, while the more sheltered coasts of eastern Vancouver Island and the mainland along the Strait of Georgia average between 65 and 150 centimetres. Canada’s longest frost-free periods of over 180 days per

Introduction 3


year are enjoyed along the edges of the coastal zone and far inland along the Fraser River valley. Temperatures fall quickly up the steep slopes of the Coast Mountains. The predominant trees in this coastal region are the western hemlock, western red cedar and balsam (amabilis fi r) in the wetter parts, and Douglas fi r and grand fi r in the drier areas.

BC’s interior region has a mainly continental type of climate, although not as severe as that of the Canadian prairies. Considerable variation in climate occurs, especially in winter, as mild Pacifi c storms bring relief from cold spells. The southern interior has the driest and warmest climate of the province. In the valleys, annual precipitation ranges from less than 30 centimetres to 50 centimetres, while daily temperatures can average over 20 degrees Celsius in July and just under freezing in January. The climate becomes more extreme further north and precipitation increases. The frost-free period in the north is short and variable. Lodgepole pine is the dominant tree of commercial value in the interior.

The northeast region of the province is an extension of the western prairie region of Alberta. It has a continental climate that is more extreme than that of the northern interior region. However, it does have long hot summers and a frost-free period long enough to grow grain, forage and other crops.

Chapter One Economic Review1

1 Refl ects information available as of June 6, 2003.

6 Chapter 1 — Economic Review


2002 Overview

The British Columbia economy grew more rapidly than expected from the 2001 slowdown, posting 1.8 per cent real growth in 2002, following the 0.2 per cent decline in 2001. British Columbia's economic turnaround was hindered by a relatively weak recovery in the U.S. economy. Continuing geopolitical uncertainty also limited growth rates for many of the province's economic partners. The lack of resolution in the U.S. softwood lumber dispute impacted the provincial forest sector. However, natural gas activity picked up towards the end of the year.

Consumer spending remained robust through the year thanks to purchases of large consumer durables. The housing sector also recorded a signifi cant increase in 2002 propelled by low mortgage rates. Although BC experienced robust job creation through the year with 78,000 jobs since December 2001, annual growth was limited to 1.6 per cent refl ecting job losses in the latter part of 2001.

Chart 1.1 Canadian and British Columbia economic growth

External Environment

During 2002, the North American economy expanded at a moderate pace, refl ecting a hesitant U.S. recovery. A much stronger recovery in Canada was evidenced by growth in employment, housing construction and trade. Geopolitical uncertainties heated up in 2002 as tensions around the war on terrorism, the situation in the Middle East, the revelation of North Korea's nuclear program and the oil sector strike in Venezuela raised concerns for the global economy.

-2

0

2

4

6

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

British Columbia Canada

Source: Statistics Canada

Per cent change in real GDP

Chapter 1 — Economic Review 7


U.S. Economy

The U.S. economy expanded 2.4 per cent in 2002, an improvement from the 0.3 per cent growth recorded in 2001 when the U.S. dipped into recession. Consumer spending was up strongly due to increased sales of consumer durables and a surge in automobile sales caused by dealer incentives and low interest rates. Housing starts rose 6.9 per cent to 1.7 million units, the highest level since 1986. However, behind the improvement in total output were signs of slowing business investment and manufacturing output. Industrial production declined 0.8 per cent in 2002, as excess capacity acted as a major brake on the economy. Consumer debt also reached record levels, and without strong job and income growth, consumers' ability to repay their loans was minimal.

Canadian Economy

The Canadian economy outperformed the U.S. economy in 2002, growing an estimated 3.3 per cent. Unlike the U.S., growth in Canada was broadly based and accompanied by signifi cant gains in employment. Canadian interest rates remained near historically low levels despite a modest increase in July. Consumer spending was strong with retail sales up 6.0 per cent in 2002. Purchases of larger consumer durables, like furniture and appliances, as well as new motor vehicles drove the increase. The manufacturing sector in Canada benefi ted from lower production costs on goods sold into the U.S. market thanks to a weak Canadian dollar

International Economy

Overseas, economic conditions were stagnant in Japan. Real GDP inched up by 0.2 per cent in 2002, following growth of just 0.4 per cent in 2001. High oil prices, resulting from the strike in Venezuela and rising tensions in the Middle East hurt the economy. The outlook for Japanese economic growth remains weak.

Elsewhere, the European economy confronted challenges including weakening domestic demand and, in Germany, a fragile banking system. The German economy grew just 0.2 per cent in 2002, the slowest growth in nine years. Robust growth in exports saved Europe's largest economy from slipping into a recession last year.

The International Monetary Fund estimates that world growth in gross domestic product rose from 2.3 per cent in 2001 to 3.0 per cent in 2002.

Financial Markets

Interest rates held steady for most of 2002. Before the 50 basis point reduction in the federal funds rate in November, this key U.S. interest rate had been unchanged since December 2001. In Canada, the Bank of Canada raised the overnight target rate by 75 basis points between April and July 2002 and then stayed on the sidelines for the remainder of the year.



Chart 1.2 External economic growth

The relative lack of movement in U.S. interest rates refl ected the weakness of the U.S. recovery. At the same time, Canada's economy rebounded strongly and output moved closer to full capacity. Rising geopolitical uncertainty and the lack of a solid global recovery helped ease some of the pressure to raise domestic interest rates.

Chart 1.3 Short-term interest rates

The value of the Canadian dollar fell against the U.S. dollar throughout 2002. For the year, the currency averaged 63.7 cents US, down 0.9 cents US from 2001. In January 2002, the Canadian dollar closed at 62.0 US, the lowest value since the Canadian dollar was established.

0

2

4

6

8

2000 2001 2002

Canada U.S.Per cent, 3-month T-bills

Source: Bank of Canada and Federal

Reserve Bank of San Francisco

-2

0

2

4

6

1998 1999 2000 2001 2002

Japan Europe

U.S. WorldPer cent change in real GDP

Source: International Monetary Fund



British Columbia Economy

The British Columbia economy grew 1.8 per cent in 2002, after a 0.2 per cent decline in 2001. Growth was mainly due to increased domestic activity. Consumer spending, which accounts for about two-thirds of economic activity in the province, benefi ted from continued low interest rates, growth in employment and federal and provincial tax cuts. Domestic demand remained relatively robust with housing starts and retail sales recording signifi cant annual per cent growth increases, and fi nal domestic demand posted 1.7 per cent growth.

Total employment rose 1.6 per cent in 2002 and the annual unemployment rate rose by 0.8 percentage points to 8.5 per cent. For the fi rst time, over two million British Columbians were employed.

Consumer demand remained strong with retail sales posting a 6.0 per cent increase in 2002, equivalent to the Canada-wide growth rate. Residential investment also grew strongly with housing starts averaging an increase of 25.5 per cent over 2001, the highest growth in a decade.

Real GDP

In 2002, economic output advanced 1.8 per cent, as consumer spending continued its fast-paced momentum from 1996. Business investment declined in 2002, due to a 21.0 per cent decrease in non-residential investment. The volume of imports rose more than exports, which also slowed overall economic growth. Consumer spending grew 2.7 per cent in 2002, continuing to be the main driver of economic growth.

Chart 1.4 British Columbia GDP by component

Capital Investment

Total capital investment1 in the province fell 4.7 per cent to $21.9 billion in 2002. Public sector investment rose 11.4 per cent, but private sector

-5

0

5

10

Consumption Government

Expenditure

Government

Investment

Business

Investment

Exports Imports Total GDP

2001 2002


Per cent change

1 Investment fi gures generated by Statistics Canada based on a survey of British Columbia businesses, institutions and government.



investment, which accounts for just over 75 per cent of total investment, fell 8.7 per cent.

After a major capital spending increase in the mining, quarrying and oil well industry in 2001, investment in the industry fell 36.0 per cent in 2002 as energy prices weakened. Information and cultural industries investment was down 27.9 per cent, and fi nance and insurance fell 23.7 per cent.

Meanwhile, despite big drops in capital spending in many industries, housing investment was up 8.3 per cent refl ecting low mortgage interest rates and rising housing starts through the year. Investment in education rose 19.3 per cent, and investment in health services was up 24.1 per cent.

Investment fi gures for 2002 include spending on major capital projects across the province including:

• The SkyTrain Millenium Line;

• Vancouver General Hospital Redevelopment;

• Kicking Horse Canyon (Golden to Yoho) 5 Mile Bridge Project;

• University of British Columbia Life Sciences Centre.

Exports

The value of foreign merchandise exports fell 9.2 per cent in 2002. Exports to the U.S., the province’s largest trading partner, fell 11.8 per cent, largely due to a decline in the value of energy exports. The value of exports to Japan dropped 4.7 per cent, led by declines in pulp, and lumber. Exports to the Pacifi c Rim, excluding Japan, rose 7.6 per cent, and exports to Western Europe fell 14.4 per cent. Appendix Table A1.7 provides detail on exports by major market and commodity.

Chart 1.5 Exports by market, 2002

U.S.

67.6%

Japan

13.4%

Other Pacific

Rim

9.8%

Western

Europe

6.4%

Other

2.8%

BC origin merchandise

exports 2002 = $28.8 billion




As a result, the U.S. was the destination of a slightly smaller share of British Columbia exports in 2002, accounting for 67.6 per cent. Japan’s share rose to 13.4 per cent (see Chart 1.5).

Commodity prices were the main reason for the decline in the value of exports in 2002. Electricity prices, in particular, declined about 83 per cent from 2001 to 2002. This caused the value of electricity exports to fall signifi cantly, despite an increase in the quantity exported. Natural gas prices fell over $10 U.S./MmBTU from their peak in January 2001 to December. They have declined a further 41 per cent in 2002 from the previous year. Forest product prices also fell during 2002.

The softwood lumber dispute with the U.S. has affected exports in an unexpected way. The U.S. imposed duties of about 27 per cent on Canadian softwood lumber that crossed the border. In order to minimize costs Canadian companies responded to the duties by increasing production at effi cient mills, while less effi cient mills closed. The lumber market became oversupplied causing prices to fall. As a result, while B.C. companies produced 11 per cent more lumber measured in volume terms in 2002, the value of lumber exports dropped 4 per cent.

• Lumber prices averaged $235 US per thousand board feet in 2002, down from $248 US in 2001.

• Pulp prices averaged $463 US per tonne in 2002, down signifi cantly from $543 US in 2001. Prices fell steadily during the year as global demand slowed.

• Newsprint prices followed pulp prices, averaging $468 US per tonne, down from $588 US in the previous year.

Chart 1.6 Key commodity prices

0

4

8

12

16

2000 2001 2002

0

100

200

300

400Natural Gas

SPF Lumber

Natural gas

$US/MmBTU, Sumas

Source: Madison’s Lumber Reporter and

Ministry of Energy and Mines

Spruce pine fir lumber

$US/000 bd feet



Population and Labour Force Characteristics

Historically, British Columbia's population has grown faster than Canada's due to large net infl ows of people from the rest of the country and immigrants from other countries. This changed in 1998. The province's population growth slowed due to a net outfl ow of people to other parts of Canada, while overall net migration remained positive. As well, net international in-migration slowed in the wake of the Asian downturn and the turnover of Hong Kong to China. By 2000, British Columbia's population growth had slowed to 0.8 per cent, slightly below the national average and the slowest rate since the province joined Canada in 1871. Subsequently the province's population grew by 1.0 per cent in 2001 and 2002, as the pace of migrants leaving BC slowed.

Map 1.1 Net interprovincial and international migration in B.C.

Chart 1.7 British Columbia population by age and sex, 2002

40 20 0 20 40

0

20

40

60

80

100+

Source: BC Stats and Statistics Canada

Age (years)

Thousands of persons

Male Female



The provincial labour force grew modestly over the past fi ve years, with the exception of 1998 and 2001 when general economic indicators were weaker. The labour force expanded by 2.6 per cent in 2002. Employment grew at an average annual rate of 1.1 per cent from 1998 to 2002. The pace of employment growth picked up from a 0.3 per cent decline in 2001 to a 1.6 per cent increase in 2002.

Labour and Income Developments

Employment levels rose in 2002 or stayed steady in all the major sectors of the economy with the exception of the public administration sector, which declined by 4.3 per cent. Manufacturing sector employment crept up 0.4 per cent led by growth in the food, paper, and transportation equipment industries. The main negative pressure on goods sector employment was from a 9.1 per cent decline in the number of jobs in the wood products industry.

Employment in the trade sector rose 3.1 per cent in 2002, adding 9,500 jobs to the total. Employment in the service industries grew 1.4 per cent, largely due to expansion in the health and welfare sector. Although B.C. experienced robust job creation through the year, with around 78,000 jobs since December 2001, annual job growth was limited to 1.6 per cent, refl ecting job losses in the latter part of 2001.

Prices and Wages

The rate of infl ation increased substantially in the second half of the year and peaked at an annual rate of 3.5 per cent in November and December of 2002. This was due to a bounce back from the very low levels of infl ation that were recorded in the months immediately after September 11, 2001.

Personal income increased 1.5 per cent in 2002, refl ecting moderate employment growth, and increases in average weekly earnings. Total wages and salaries grew 2.4 per cent between 2001 and 2002, bolstered by high-paying jobs in high-tech as well as in the resource industry, but investment income weakened, refl ecting lower interest rates and a weak stock market. Corporate profi ts fell slightly for the second year in a row, down 2.8 per cent in 2001 and 1.9 per cent last year.

Table 1.1 British Columbia Population and Labour Market Statistics

Units 1998 1999 2000 2001 2002

Population (as at July 1) (thousands) 3,997.1 4,028.3 4,060.1 4,101.6 4,141.3

(% change) 0.9 0.8 0.8 1.0 1.0

Net Migration 10,745 20,339 18,506 31,634 23,498

International 28,266 32,752 33,289 37,966 28,835

Interprovincial -17,521 -12,413 -14,783 -6,332 -5,337

Labour Force (thousands) 2,051.2 2,079.1 2,099.7 2,103.5 2,157.8

(% change) 0.5 1.4 1.0 0.2 2.6

Employment (thousands) 1,870.2 1,906.4 1,949.1 1,942.4 1,973.4

(% change) 0.1 1.9 2.2 -0.3 1.6

Unemployment Rate (%) 8.8 8.3 7.2 7.7 8.5




Consumer Expenditure and Housing

Consumer spending remained relatively robust through the year. The total value of retail sales rose 6.0 per cent in 2002, following a 6.0 per cent increase in 2001. The increase was mainly due to the purchases of large consumer durables including new motor vehicles, furniture and appliances.

Housing starts soared in the province through the year as mortgage interest rates continued to decline. For 2002, housing starts totaled 21,625 units, a 25.5 per cent increase from 2001 and the largest increase in a decade.

Chart 1.8 Building permits by activity

As a result of improving housing demand, the value of residential building permits rose 37.4 per cent to $3.9 billion. The housing sector boom resulted from a combination of several factors. Strong employment growth, very low

-40

-20

0

20

40

60

1998 1999 2000 2001 2002

Residential

Non-residential


Per cent change

Table 1.2 Price and Earnings Indices

Units 1998 1999 2000 2001 2002

Consumer Price Index (1992=100) 110.0 111.2 113.3 115.2 117.9

(British Columbia) (% change) 0.3 1.1 1.9 1.7 2.3

Average weekly earnings ($) 643.06 650.96 662.81 667.86 674.78

(% change) 0.7 1.2 1.8 0.8 1.0

Wages and salaries ($ millions) 54,174 56,263 60,270 61,496 62,985

(% change) 2.1 3.9 7.1 2.0 2.4

Personal income ($ millions) 98,135 101,384 107,460 110,258 111,955

(% change) 2.3 3.3 6.0 2.6 1.5

Corporate profits (pre-tax) ($ millions) 7,335 9,121 10,300 10,009 9,821

(% change) -11.5 24.3 12.9 -2.8 -1.9




mortgage rates, the scarcity of dwellings available for rent or sale, and rising disposable income together created exceptional conditions that attracted consumers to the new home market. The value of non-residential building permits fell 16.6 per cent to $1.8 billion.

Industrial Structure and Performance

The province's rich endowment of natural resources and their development historically formed the backbone of British Columbia's economic structure. In the past, the economy was largely based on primary and secondary forest production for export markets. Other natural resource sectors, such as agriculture, mining (including oil and gas) and fi shing (including aquaculture) also contributed signifi cantly.

In recent years, a more diversifi ed economy has emerged, supported by many non-resource activities such as fi lm, tourism, high-technology industries including software and biotechnology, and other value-added industries. The British Columbia economy is steadily maturing into a more broadly based structure that is becoming less vulnerable to changes in international markets for natural resources. By comparison to other Canadian provinces, B.C.'s service sector is one of the largest as a share of GDP.

Chart 1.9 Service industries in British Columbia

The distribution of industrial output refl ects the declining relative share of natural resources in British Columbia's gross domestic product in the past decade or so. The agriculture, forestry, fi shing, hunting and mining industries (including their support activities) produced 6.5 per cent of total real gross domestic product in 2002, down from 7.0 per cent in 1992. Manufacturing industries (sawmills, pulp mills, factories, smelters, etc.) which, for the most part, process primary resource products into goods of higher value, produced 10.5 per cent of the total real gross domestic product in 2002, compared to 12.0 per cent in 1992.

70

74

78

82

1992 1994 1996 1998 2000 2002

Real GDP

EmploymentPer cent of total




In total, the goods-producing sector, including the construction and utilities industries, produced 24 per cent of the province's total output in 2002. This was down from 25 per cent a year earlier, and 29 per cent in 1992.

Service-producing industries generated 76 per cent of the total provincial gross domestic product in 2002. Industries within the service sector include: transportation, communications and storage; wholesale and retail trade; fi nance, insurance and real estate; community, business and personal services; and public administration and defense.

The goods-producing sector employed only 20 per cent of workers in 2002, down from 23 per cent in 1992. With the declining share of natural resources in provincial output, the percentage of people employed in the goods sector has also seen a declining trend in recent years. The service-producing sector is the province's largest employer, accounting for nearly 80 per cent of total employment in 2002.

High Tech

The high technology sector2 has been a leading performer in British Columbia's economy, and outperformed other sectors in revenue, employment, and wage and salary growth. However, the global meltdown in high-tech in 2001 also affected British Columbia's high-tech industry, as total output from the high-tech sector shrank by 4.0 per cent in 2001. This was the fi rst time since 1996 that GDP growth in the high-tech sector was below the provincial average. Revenue and earnings also fell due to a downturn in the high-tech manufacturing sector.

Chart 1.10 Trends in high technology employment in B.C.

Although the service industries dominate the high-tech sector in terms of size, it has been the manufacturers that have provided much of the stimulus for GDP growth in the last decade. High-tech manufacturing industries’ average

3.7

17.2

8.2

22.0

10.0

-1.0

-3.2

8.3

-7.0

10.5

12.9

8.8

-10

0

10

20

30

1996 1997 1998 1999 2000 2001

Manufacturing Services


Per cent change in employment

2 Data for the high technology sector in 2002 was not available at the time of publication.



annual GDP growth rate was 11.7 per cent over the last ten years, compared to 4.5 per cent for high-tech service industries over the same period.

Employment in B.C.’s high-tech sector has grown rapidly over the past decade. The year 2001 was no exception as employment grew substantially to 45,550 workers, up 5.2 per cent from 2000. This compares to -0.3 per cent growth for employment in all sectors in the province3. The high-tech sector in B.C. gained approximately 2,260 jobs in 2001.

High-tech employment growth outpaced the expansion of overall employment in most years in the last decade. This long run of growth has caused the number of workers in the high-tech sector to increase by almost 68 per cent over the last ten years. The high-tech sector now accounts for 2.9 per cent of all jobs, up from 2.0 per cent in 1991.

Tourism

The tourism industry has been another bright spot in British Columbia’s economy in the past decade, growing faster than the overall provincial economy. Tourism grew rapidly in 1999 and 2000, buoyed by a low Canadian dollar. This fast-paced growth continued into the fi rst half of 2001 until the terrorist attacks on September 11th, when tourism revenue tumbled as a result of the reduced number of tourists. However, tourism room revenue still grew 2.2 per cent in 2001. Room revenues increased by the same amount again in 2002, topping $1.5 billion.

Chart 1.11 B.C. Tourism industry

800

1,000

1,200

1,400

1,600

1995 1996 1997 1998 1999 2000 2001 2002

5,000

6,000

7,000

8,000

9,000

10,000

Room Revenues

Visitor Entries

Room revenue ($ millions)

Source: BC Stats

Visitor entries (000’s)

3 Economy wide fi gures are based on the Labour Force Survey.



British Columbia is emerging as a key player in North America’s energy future. Its oil, natural gas and hydroelectric production is already tied into the North American market through a series of pipelines and transmission interconnects. Furthermore, with its large reserves of natural gas and untapped potential, British Columbia has the capacity to signifi cantly increase its energy production and exports in the future.

BC’s Economic Advantages:

• Highly productive onshore oil and gas industry with three of the largest recent natural gas fi nds in North America (Ladyfern, Monkman and Greater Sierra);

• Signifi cant coalbed methane potential;

• Seven major undeveloped onshore basins;

• Huge offshore potential and a new, dedicated offshore team to work with

First Nations, communities and the federal government to develop BC’s offshore oil and gas resources;

• Large and diverse hydro production, and the second lowest industrial rates in North America;

• Connected to U.S. infrastructure and energy hubs;

• Centre of North America’s fuel cell industry; and

• Tremendous potential for solar, wind, geothermal, ocean, small hydro, biofuels and biomass energy.

British Columbia’s natural gas production accounts for three percent of North American output. However, while U.S. production has remained static, British Columbia’s production has almost doubled over the last 10 years. British Columbia has huge proven reserves and undiscovered resource potential. With its well-developed

Energy In British Columbia



pipeline infrastructure and close proximity to the U.S. market, British Columbia will continue to expand its role in the North American energy market.

• British Columbia’ producing fi elds (in the north east of the province) have marketable natural gas reserves of 8.9 trillion cubic feet (Tcf).

• Even in the producing area of northeastern BC there is a further 14

to 30 Tcf of undiscovered resources potential.

• Several coalbed methane (CBM) evaluation projects are underway.

• British Columbia produces 16 million barrels (MMBO) of oil per year.

• British Columbia produces 1.1 Tcf of natural gas per year.

Under-Explored Basins

Resource Potential Producing Area of NE BC

Gas CBM Oil Gas Oil

Onshore 18 Tcf 89 Tcf 7,700 MMBO Marketable Remaining 8-9 Tcf 160 MMBO

Reserves

Offshore 42 Tcf – 10,000 MMBO Resource Potential 14-30 Tcf 173 MMBO

(Marketable)



British Columbia is committed to building a strong and vibrant economy characterized by new investment, new job opportunities and a higher standard of living for British Columbians. Several key initiatives include:

Deregulation

As part of the deregulation initiative more than 28,000 regulatory requirements have been eliminated, providing greater fl exibility for businesses and making the province an attractive location to invest.

Companies will soon be able to use a single business number to complete several business processes at one-time, including incorporations, re-organizations and data maintenance. The new Business Corporations Act provides greater fl exibility and helps to make the province a more attractive location to do business. The new act adopted the latest and best ideas from other jurisdictions, clarifi es the rules and embraced technological advances such as electronic fi ling.

Energy

A new energy plan was designed to capitalize on British Columbia's competitive advantage in energy by increasing investment in the energy sector and maintaining low-cost electricity and public ownership of BC Hydro.

Transportation Infrastructure Plan

The government has announced a multi-year plan to open up the province by building an integrated and competitive transportation system throughout British Columbia.

In addition to a new transportation investment plan, the government has implemented a new capital asset management framework that encourages new ways to provide public sector

infrastructure. The framework provides for alternative service delivery options, including public private partnerships (P3s).

Forestry Policy Reform

The forest industry remains a cornerstone of the British Columbia economy. The government has taken several steps to improve the long-term viability of the industry and improve its competitiveness. The new Forest and Range Practices Act replaces the Forest Practices Code with a results-based regulatory regime. The new regime came into effect April 1, 2003 and will substantially reduce industry costs while ensuring sustainability and protecting other values associated with British Columbia's forests.

In addition, the province has embarked on series of reforms to transform the industry to a more market - based approach. These reforms include changes to the tenure system such as removal of minimum cut levels, more auction based timber sales, and an end to the appurtenancy system.

Competitive Tax Regime

British Columbia's tax system is now more competitive. After cutting personal income taxes by 25 per cent, the overall level of taxes for British Columbia families are the second lowest in the country. And the province has the lowest income tax rates in the country for the bottom two tax brackets.

A substantial investment has also been made in restoring B.C.'s business tax climate. The province's ability to attract and retain investment has been improved due to a lower corporate income tax rate, the elimination of the corporate capital tax, a sales tax exemption for production machinery and equipment, and sector specifi c tax reductions.

B.C.'s Economic Development Initiatives

Appendix 1

22 Appendix 1 — Economic Review


Table A1.1 Summary of Economic Activity for British Columbia

Units 1988 1989 1990 1991 1992

Annual aggregate indicators

Population 1………………………………………………… (thousands) 3,115.7 3,198.5 3,291.4 3,373.4 3,470.3

Nominal gross domestic product (at market prices)…… ($ millions) 69,408 75,582 79,350 81,849 87,242

Real gross domestic product (chained 1997 $)………… ($ millions) 91,395 94,400 95,722 95,897 98,373

Personal income…………………………………………… ($ millions) 58,298 65,009 72,038 75,336 78,610

Capital investment………………………………………… ($ millions) - - - 17,370 17,979

Business incorporations…………………………………… (number) 18,703 21,817 19,550 18,528 20,406

Labour statistics

Labour force………………………………………………… (thousands) 1,599 1,659 1,700 1,749 1,804

Employment………………………………………………… (thousands) 1,435 1,509 1,555 1,573 1,620

Unemployment rate………………………………………… (per cent) 10.2 9.0 8.6 10.1 10.2

Prices and earnings

Consumer price index (British Columbia)………………… (1992=100) 83.9 87.7 92.4 97.4 100.0

Consumer price index (Vancouver)……………………… (1992=100) 83.8 87.5 92.3 97.1 100.0

Average weekly wage rate 2……………………………… ($) - - - - -

Wages and salaries 2……………………………………… ($ millions) - - - - -

Financial indicators

Prime rate…………………………………………………… (per cent) 10.83 13.33 14.06 9.94 7.48

Canada/U.S. exchange rate……………………………… (U.S. cents) 81.25 84.46 85.71 87.28 82.73

Conventional (5 year) mortgage rate…………………… (per cent) 11.65 12.06 13.35 11.13 9.51

Other indicators

Manufacturing shipments………………………………… ($ millions) - - - - 24,398

Retail sales 3………………………………………………… ($ millions) 20,802 22,791 24,200 23,613 24,512

Housing starts……………………………………………… (number) 30,487 38,894 36,720 31,875 40,621

Non-residential building permits………………………… ($ millions) 1,647 1,812 1,833 1,803 2,082

Tourism gross domestic product 2………………………… ($ millions) - - - - -

High-tech gross domestic product 5……………………… ($ millions) - - - 1,674 1,760

B.C. product exports……………………………………… ($ millions) 17,830 18,334 16,650 15,301 16,363

Commodity data

Lumber production………………………………………… (thousand m3) 36,736 35,952 33,514 31,406 33,396

Log production (timber harvest)…………………………… (thousand m3) 86,808 87,415 78,318 73,677 74,006

Market pulp shipments…………………………………… (000 tonnes) 4,141 4,189 3,547 4,014 3,825

Newsprint, other paper and paperboard production…… (000 tonnes) 2,878 2,846 2,994 2,721 2,682

Petroleum and natural gas production…………………… ($ millions) 736 783 899 858 890

Coal production…………………………………………… (000 tonnes) 24,813 25,134 24,367 24,848 18,094

Solid mineral production…………………………………… ($ millions) 3,224 3,180 2,971 2,755 2,537

Electric power generated………………………………… (GW.h) 60,943 57,655 60,662 62,981 64,058

Farm cash receipts………………………………………… ($ millions) 1,206 1,255 1,299 1,340 1,427

Landed value of fish products…………………………… ($ millions) 573 513 559 492 533

1 As at July 1. Data take into account adjustments made for net census undercount in 1991 and 1996, and non-permanent residents.2 Data prior to 1997 are not available.3 Retail sales data prior to 1991 include the old federal manufacturer's sales tax (FST); data for 1991 onwards does

not include the goods and services tax.4 Data not available.5 Data prior to 1991 are not available.

Sources: Statistics Canada and BC STATS, Ministry of Finance, based on federal, provincial and industry data.

Appendix 1 — Economic Review 23


Table A1.1 Summary of Economic Activity for British Columbia - continued

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2001-2002

(per cent)

3,571.5 3,681.8 3,784.0 3,882.0 3,959.7 3,997.1 4,028.3 4,060.1 4,101.6 4,141.3 1.0

94,077 100,512 105,670 108,865 114,383 115,641 120,599 129,356 130,859 134,365 2.7

102,770 105,669 108,194 110,857 114,383 115,883 119,122 124,187 123,912 126,141 1.8

81,914 85,703 90,056 92,661 95,925 98,135 101,384 107,460 110,258 111,955 1.5

18,853 21,335 20,556 19,411 22,552 20,643 20,652 21,025 22,934 21,853 -4.7

22,955 25,774 23,846 22,848 22,958 20,759 21,009 21,515 19,749 21,262 7.7

1,856 1,928 1,958 1,995 2,040 2,051 2,079 2,100 2,104 2,158 2.6

1,676 1,754 1,792 1,821 1,869 1,870 1,906 1,949 1,942 1,973 1.6

9.7 9.0 8.4 8.7 8.4 8.8 8.3 7.2 7.7 8.5 10.4

103.5 105.5 107.9 108.9 109.7 110.0 111.2 113.3 115.2 117.9 2.3

103.6 105.7 108.4 109.2 109.8 110.4 111.4 113.9 116.0 118.6 2.2

- - - - 610.7 618.4 625.2 637.1 645.7 667.5 3.4

- - - - 53,035 54,174 56,263 60,270 61,496 62,985 2.4

5.94 6.88 8.65 6.06 4.96 6.60 6.44 7.27 5.81 4.21 -27.5

77.51 73.22 72.86 73.34 72.22 67.41 67.31 67.32 64.56 63.68 -1.4

8.78 9.53 9.16 7.93 7.07 6.93 7.56 8.35 7.40 7.02 -5.2

26,583 30,333 34,207 32,932 33,496 31,757 35,616 37,768 34,106 34,236 0.4

26,553 29,442 31,496 32,071 33,736 33,049 33,684 35,821 37,979 40,273 6.0

42,807 39,408 27,057 27,641 29,351 19,931 16,309 14,418 17,234 21,625 25.5

1,944 1,772 1,966 1,957 1,960 2,022 2,104 2,089 2,125 1,771 -16.7

- - - - 4,739 4,892 5,047 5,400 5,587 n.a.4 -

1,918 1,964 2,283 2,179 2,608 2,716 2,961 3,435 3,449 n.a.4 -

19,064 22,894 26,893 25,765 26,761 26,045 29,113 33,750 31,780 28,843 -9.2

33,935 33,671 32,611 32,671 31,562 30,238 32,397 32,352 30,182 33,555 11.2

79,239 75,649 76,472 75,213 68,628 64,967 75,997 76,984 72,009 73,386 1.9

4,040 4,763 4,572 4,390 4,532 4,462 4,995 5,152 4,710 4,493 -4.6

3,052 2,961 2,850 2,834 2,605 2,659 3,039 3,093 2,900 2,920 0.7

1,089 1,270 1,040 1,333 1,588 1,573 2,091 4,783 5,666 4,256 -24.9

19,482 22,966 24,515 26,179 27,812 25,276 24,810 26,152 26,482 24,409 -7.8

2,371 2,676 3,437 3,087 3,131 3,025 2,565 2,879 2,866 2,814 -1.8

58,774 61,015 58,006 71,765 66,961 67,710 68,045 68,241 57,332 64,888 13.2

1,452 1,543 1,599 1,712 1,759 1,835 1,938 2,074 2,249 2,242 -0.3

605 735 587 589 604 547 613 659 645 n.a.4 -



Table A1.2 British Columbia Real GDP at Market Prices, Expenditure Based

Machinery and

Consumer Government Residential Non-Residential Equipment Business

Expenditure Expenditure Investment Investment Investment Investment Exports Imports Real GDP

(millions of 1997 $, chained)

1997……… 72,380 22,266 8,716 5,791 6,799 21,306 49,691 55,143 114,383

1998……… 73,585 22,875 7,543 4,704 7,340 19,598 51,092 54,559 115,883

1999……… 75,504 22,820 7,048 5,004 7,711 19,800 55,060 58,083 119,122

2000……… 78,051 23,391 7,048 5,202 8,626 20,915 57,403 60,126 124,187

2001……… 80,289 24,734 7,739 5,459 8,658 21,896 54,962 60,720 123,912

2002……… 82,461 24,926 8,951 4,315 8,245 21,468 55,429 61,886 126,141

(annual percentage change)

1998……… 1.7 2.7 -13.5 -18.8 8.0 -8.0 2.8 -1.1 1.3

1999……… 2.6 -0.2 -6.6 6.4 5.1 1.0 7.8 6.5 2.8

2000……… 3.4 2.5 0.0 4.0 11.9 5.6 4.3 3.5 4.3

2001……… 2.9 5.7 9.8 4.9 0.4 4.7 -4.3 1.0 -0.2

2002……… 2.7 0.8 15.7 -21.0 -4.8 -2.0 0.8 1.9 1.8


Table A1.3 British Columbia GDP at Basic Prices, by Industry

Crop and Fishing, Forestry Mining, Transportation Wholesale Finance, Public

Animal Hunting and and Oil and Gas and and Retail Insurance and Other Administration Total

Production Trapping Logging Extraction Manufacturing Construction Utilities Warehousing Trade Real Estate Services and Defence GDP

(millions of 1997 $)

1997… 968 201 3,610 2,646 11,479 6,434 2,468 6,590 10,982 23,606 29,807 5,764 104,554

1998… 917 131 3,683 2,855 11,323 5,895 2,526 6,607 11,735 23,912 30,720 5,849 106,151

1999… 999 104 3,454 2,803 12,773 5,826 2,599 6,696 11,866 24,465 31,352 5,915 108,851

2000… 1,049 96 3,480 3,199 13,431 5,879 2,645 6,898 12,392 25,396 33,116 5,968 113,550

2001… 1,059 97 3,292 3,450 12,058 5,905 2,461 6,754 12,567 26,214 34,528 6,154 114,539

2002… 1,073 101 3,192 3,203 12,249 5,804 2,507 6,763 13,418 27,144 35,238 6,195 116,888


1998… -5.3 -35.0 2.0 7.9 -1.4 -8.4 2.3 0.3 6.9 1.3 3.1 1.5 1.5

1999… 9.0 -20.4 -6.2 -1.8 12.8 -1.2 2.9 1.3 1.1 2.3 2.1 1.1 2.5

2000… 5.0 -7.5 0.8 14.1 5.2 0.9 1.8 3.0 4.4 3.8 5.6 0.9 4.3

2001… 0.9 0.5 -5.4 7.8 -10.2 0.5 -7.0 -2.1 1.4 3.2 4.3 3.1 0.9

2002… 1.3 5.0 -3.0 -7.1 1.6 -1.7 1.9 0.1 6.8 3.5 2.1 0.7 2.1




Table A1.4 British Columbia GDP, Income Based

Interest and Accrued Net Net Income of Indirect Capital Cons.

Corporation Miscellaneous Income of Non-farm Inventory Net Domestic Taxes Allowances and GDP GDP at

Labour Profits before Investment Farm unincorporated Valuation Product at less Misc. Valuation Statistical at Market Basic

Income Taxes Income Operators Business Adjustment Basic Prices Subsidies Adjustments Discrepency Prices Prices

($ millions)

1997… 60,681 8,286 8,444 89 7,780 101 90,040 14,480 14,526 -4 114,383 104,562

1998… 61,965 7,335 8,355 166 8,285 -24 90,860 14,515 15,050 -6 115,641 105,904

1999… 64,045 9,121 8,406 187 8,660 -408 94,829 14,980 15,611 -3 120,599 110,437

2000… 68,369 10,300 10,302 188 8,908 -487 102,453 15,544 16,178 54 129,356 118,685

2001… 69,882 10,009 8,344 319 9,167 -23 102,600 15,908 16,958 295 130,859 119,853

2002… 71,348 9,821 9,225 266 9,691 -356 104,796 16,486 17,676 208 134,365 122,680


1998… 2.1 -11.5 -1.1 86.5 6.5 -123.8 0.9 0.2 3.6 50.0 1.1 1.3

1999… 3.4 24.3 0.6 12.7 4.5 1,600.0 4.4 3.2 3.7 -50.0 4.3 4.3

2000… 6.8 12.9 22.6 0.5 2.9 19.4 8.0 3.8 3.6 -1,900.0 7.3 7.5

2001… 2.2 -2.8 -19.0 69.7 2.9 -95.3 0.1 2.3 4.8 446.3 1.2 1.0

2002… 2.1 -1.9 10.6 -16.6 5.7 1,447.8 2.1 3.6 4.2 -29.5 2.7 2.4




Table A1.5 Employment by Industry in British Columbia

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

(thousands)

Total - all industries………………………1,620 1,676 1,754 1,792 1,821 1,869 1,870 1,906 1,949 1,942 1,973

Primary industries………………………… 79 79 80 81 85 88 84 78 85 69 69

Agriculture……………………………… 31 34 31 26 30 33 33 29 30 26 30

Forestry………………………………… 27 26 31 36 32 33 30 30 37 26 26

Fishing and trapping…………………… 5 6 6 5 5 5 4 4 5 5 3

Mining…………………………………… 16 12 12 14 18 17 17 15 13 12 10

Manufacturing……………………………… 168 179 184 189 195 197 196 192 205 196 197Food, beverages & tobacco…………… 21 22 27 22 24 26 26 22 24 26 27

Wood products………………………… 46 49 50 43 44 45 44 42 47 50 45

Paper …………………………………… 21 22 21 24 23 23 23 22 18 15 17

Printing & related support activities…… 9 8 9 9 12 10 8 9 11 8 9

Primary metals………………………… 7 8 9 12 12 9 9 9 11 8 6

Metal fabrication………………………… 10 9 9 10 9 11 11 12 13 13 13

Transportation equipment……………… 8 7 8 9 9 13 13 13 13 10 13

Other manufacturing…………………… 47 55 51 60 63 62 64 63 70 66 67

Construction………………………………… 114 114 126 125 120 123 118 115 113 115 121

General contractors…………………… 43 42 47 44 42 39 37 42 42 41 41

Special trade contractors……………… 72 72 78 82 77 84 81 74 71 74 79

Utilities……………………………………… 11 12 13 11 11 10 11 12 11 12 12

Transportation and warehousing 101 101 99 97 99 109 106 118 114 107 110

Transportation…………………………… 99 95 96 93 96 103 103 114 111 103 105

Warehousing and storage……………… 2 5 3 4 4 6 3 4 3 4 5

Trade………………………………………… 265 275 289 300 294 302 294 309 303 310 319

Wholesale trade………………………… 60 64 64 66 68 71 62 80 67 69 73

Retail trade……………………………… 205 211 226 234 226 230 233 229 236 241 246

Finance, Insurance, Real Estate

& Leasing………………………………… 109 114 118 118 124 127 123 120 120 116 119

Finance…………………………………… 42 47 48 48 51 56 53 54 53 54 54

Insurance ……………………………… 24 22 25 22 24 27 24 23 28 24 23

Real Estate……………………………… 35 35 35 38 39 33 38 34 30 27 31

Leasing…………………………………… 9 10 10 10 10 11 8 10 9 12 11

Service industries………………………… 674 700 746 769 787 814 845 873 908 929 942Education and related services……… 106 113 120 123 118 122 120 128 135 136 140

Health and welfare services…………… 163 164 171 177 183 190 195 195 202 204 217

Information, culture & recreation……… 65 67 79 86 85 89 94 92 99 106 106

Services to business management…… 127 142 154 157 166 175 190 201 208 215 211

Accommodation and food services…… 131 121 129 135 143 145 152 153 164 171 171

Miscellaneous services………………… 82 92 93 91 92 93 94 105 99 98 97

Public administration……………………… 99 101 100 104 107 100 93 90 90 89 85

Federal administration………………… 35 34 33 33 37 34 29 32 32 30 31

Provincial administration……………… 33 30 34 38 36 32 29 28 26 32 26

Local administration…………………… 32 38 33 34 34 34 35 31 31 27 28

Source: Statistics Canada, Labour Force Survey (unpublished data).



Table A1.6 Capital Investment by Industry

Preliminary 2001 2002

Actual Actual Actual Actual Actual Intentions to to

1998 1999 2000 2001 2002 2003 2002 2003

($ millions) (per cent)

Agriculture, forestry, fishing and hunting……… 426.6 346.1 353.8 293.1 289.8 331.7 -1.1 14.5

1,723.2 1,126.4 1,749.0 2,917.9 1,867.6 2,008.6 -36.0 7.5

1,187.1 1,249.2 1,355.0 1,268.0 1,060.8 1,271.8 -16.3 19.9

296.8 268.2 250.9 264.1 277.8 293.3 5.2 5.6

Transport & warehousing……………………… 1,767.9 2,024.9 2,231.8 1,950.8 2,097.1 1,854.7 7.5 -11.6

Utilities…………………………………………… 908.2 874.9 832.7 935.2 1,188.6 1,316.6 27.1 10.8

66.1 50.0 71.2 79.2 59.9 63.9 -24.4 6.7

643.5 726.7 819.8 843.9 774.6 820.7 -8.2 6.0

1,627.8 1,827.2 1,605.2 1,419.1 1,082.6 1,195.7 -23.7 10.4

1,401.7 1,273.1 1,310.7 1,382.0 1,240.0 1,291.4 -10.3 4.1

n.a. 1,150.1 961.3 1,403.5 1,011.7 905.9 -27.9 -10.5

335.6 226.8 272.6 285.6 255.5 268.4 -10.5 5.0

n.a. 38.8 15.8 28.7 20.2 21.5 -29.6 6.4

109.3 112.9 78.3 106.7 69.4 77.4 -35.0 11.5

85.2 105.2 83.0 111.2 79.9 107.2 -28.1 34.2

Accommodation and food services…………… 295.8 247.9 230.5 213.9 232.4 220.5 8.6 -5.1

487.5 654.2 667.7 616.3 735.0 743.8 19.3 1.2

Health services………………………………… 219.5 420.8 439.1 540.4 670.5 680.0 24.1 1.4

Public administration…………………………… 1,756.6 2,276.4 2,102.1 2,131.3 2,225.4 2,302.5 4.4 3.5

Other services…………………………………… 109.1 148.0 137.9 159.1 172.9 163.0 8.7 -5.7

Housing………………………………………… 5,860.4 5,209.9 5,185.8 5,705.6 6,176.8 6,709.4 8.3 8.6

Total1…………………………………………… 20,642.8 20,651.6 21,025.4 22,934.3 21,852.8 22,965.9 -4.7 5.1

Public…………………………………………… 3,723.8 4,612.3 4,617.6 4,543.2 5,062.5 5,227.4 11.4 3.3

Private…………………………………………… 16,918.9 16,039.3 16,407.8 18,391.1 16,790.3 17,738.6 -8.7 5.6

Total……………………………………………… 20,642.8 20,651.6 21,025.4 22,934.3 21,852.8 22,965.9 -4.7 5.1

Machinery and equipment……………………… 8,028.0 7,841.3 8,359.4 8,869.1 8,439.3 8,831.6 -4.8 4.6

Construction………………………………………12,614.8 12,810.4 12,666.0 14,065.1 13,413.6 14,134.3 -4.6 5.4

Total……………………………………………… 20,642.8 20,651.6 21,025.4 22,934.3 21,852.8 22,965.9 -4.7 5.1

Note: Totals may not add due to rounding.1 Totals may not add due to some data not being disclosed for confidentiality reasons

Source: Statistics Canada.

Education services………………………………

Information and cultural industries……………

Professional, scientific and technical…………

Management of companies and enterprises…

Admin, waste and remediation services………

Retail trade………………………………………

Finance and insurance…………………………

Real estate, rental and leasing…………………

Arts, entertainment and recreation……………

Mining, quarrying and oil well industries………

Manufacturing……………………………………

Construction………………………………………

Wholesale…………………………………………



Table A1.7 British Columbia International Goods Exports by Major Market and

Selected Commodities, 2002

European Other Total -

Commodity U.S. Japan Union 1Markets All Countries

($ millions)

Solid wood products……………………………………………… 6,963 1,761 232 332 9,288Lumber (softwood)…………………………………………… 4,622 1,242 213 266 6,343Cedar shakes and shingles………………………………… 294 0 2 3 299Plywood (softwood)…………………………………………… 350 45 8 2 405Other panel products………………………………………… 500 33 1 7 541Selected value-added wood products……………………… 809 138 4 22 973Other…………………………………………………………… 388 302 4 34 728

Pulp and paper products………………………………………… 2,284 464 903 1,418 5,069Pulp…………………………………………………………… 620 299 864 1,028 2,811Newsprint……………………………………………………… 411 136 0 131 678Paper, paperboard - excluding newsprint………………… 1,126 26 38 241 1,431Other…………………………………………………………… 126 3 1 19 149

Agriculture and food other than fish…………………………… 1,070 123 35 196 1,424Fruit and nuts………………………………………………… 128 11 3 12 154Vegetables…………………………………………………… 192 11 4 13 220Other…………………………………………………………… 750 101 28 171 1,050

Fish products……………………………………………………… 676 198 47 93 1,014Whole fish; fresh, chilled, frozen - excluding salmon……… 124 54 12 8 198Whole salmon; fresh, chilled, frozen……………………… 291 15 0 6 312Salmon; canned, smoked, etc.……………………………… 5 2 32 14 53Other…………………………………………………………… 257 127 3 64 451

Metallic mineral products………………………………………… 417 563 30 410 1,420Copper ores and concentrates……………………………… 12 186 0 151 349Molybdenum ores and concentrates……………………… 14 37 28 8 87Unwrought aluminum………………………………………… 72 231 1 148 452Unwrought zinc……………………………………………… 241 3 0 67 311Other…………………………………………………………… 78 107 1 34 220

Energy products…………………………………………………… 2,275 487 297 460 3,519Natural gas…………………………………………………… 1,693 0 0 0 1,693Coal…………………………………………………………… 133 486 297 457 1,373Electricity……………………………………………………… 288 0 0 0 288Other…………………………………………………………… 162 1 0 2 165

Machinery and equipment……………………………………… 2,725 94 202 318 3,339Motor vehicles and parts…………………………………… 606 7 8 33 654Electrical/electronic/communications……………………… 422 42 49 68 581Other…………………………………………………………… 1,697 45 145 216 2,103

Plastics and articles of plastic…………………………………… 459 2 7 18 486Apparel and accessories………………………………………… 197 3 3 3 206

All other commodities…………………………………………… 2,438 176 40 424 3,078

Total 19,504 3,869 1,796 3,674 28,843

1 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,

Sweden and the United Kingdom.

Source: BC STATS



Table A1.8 British Columbia International Goods Exports by

Market Area, 2002

Change Percent of Total

2000 2001 2002 2001-2002 2001 2002


United Kingdom…………………………… 381 354 337 -4.8 1.1 1.2

Germany…………………………………… 534 381 320 -16.0 1.2 1.1

People's Republic of China………………… 741 761 843 10.8 2.4 2.9

Hong Kong…………………………………… 299 236 228 -3.4 0.7 0.8

Taiwan……………………………………… 422 333 354 6.3 1.0 1.2

Japan………………………………………… 4,890 4,058 3,869 -4.7 12.8 13.4

South Korea………………………………… 930 758 764 0.8 2.4 2.6

India………………………………………… 99 118 120 1.7 0.4 0.4

Australia……………………………………… 251 172 187 8.7 0.5 0.6

Mexico……………………………………… 58 83 81 -2.4 0.3 0.3

United States………………………………… 22,196 22,110 19,504 -11.8 69.6 67.6

Other………………………………………… 2,948 2,416 2,235 -7.5 7.6 7.7

Total 33,749 31,780 28,843 -9.2 100.0 100.0

Market Areas:

Western Europe 1…………………………… 2,611 2,148 1,838 -14.4 6.8 6.4

Pacific Rim 2………………………………… 8,176 6,689 6,701 0.2 21.0 23.2

1 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,

Sweden and the United Kingdom.2 Australia, Brunei Darussaiam, China, Fiji, Hong Kong, Indonesia, Japan, Laos, Macau, Malaysia, Mongolia, New Zealand,

North Korea, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

Source: BC STATS



Table A1.9 Historical Commodity Prices (in U.S. Dollars)

Change

2001 to

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2002

Metals (per cent)

Copper (London; $/lb)…….. 0.87 1.05 1.33 1.04 1.03 0.75 0.71 0.82 0.72 0.71 -1.2

Lead (London; $/lb)……….. 0.18 0.25 0.28 0.35 0.28 0.24 0.23 0.21 0.22 0.21 -4.5

Zinc (London; $/lb)………… 0.46 0.49 0.53 0.51 0.65 0.51 0.53 0.56 0.44 0.35 -20.5

Gold (London; $/troy oz)….. 360 384 384 388 331 294 279 280 271 310 14.4

Silver (London; $/troy oz)… 4.30 5.28 5.21 5.18 4.89 5.53 5.25 5.00 4.39 4.60 4.8

Molybdenum ($/lb)…………. 2.28 4.50 7.42 3.61 4.18 3.31 2.65 2.51 2.31 3.59 55.4

Aluminum (London; $/lb)…… 0.52 0.67 0.82 0.68 0.73 0.62 0.62 0.69 0.65 0.61 -6.2

Forest Products

Lumber (Madison's

Lumber Reporter;

WSPF, $/1000 bd ft)……. 333 342 251 351 353 287 342 256 248 235 -5.3

Pulp (Northern Europe;

$/tonne; transaction

price)…………………….. 427 573 883 590 566 515 523 681 543 463 -14.6

Newsprint (Pulp and

Paper Week;

$/tonne)………………….. 442 465 674 652 560 595 513 564 588 468 -20.4

Hemlock baby squares

(Madison's Lumber

Reporter; 3 9/16")………. 804 852 862 796 821 556 585 566 583 593 1.7

Other

Oil (West Texas

Intermediate;

$/barrel)…………………. 18 17 18 22 21 14 19 30 26 26 0.7

Natural Gas (Sumas;

$/Mmbtu)…………………. 1.89 1.60 1.03 1.33 1.72 1.61 2.15 4.17 4.58 2.68 -41.5

Electricity (Mid

Columbia Index

in US$/MW.h)…………… --- --- --- --- --- --- 27 138 143 24 -83.2

Source: Ministry of Finance, Ministry of Energy and Mines



Table A1.10 British Columbia Forest Sector Economic Activity Indicators

Change 1

Indicator 1998 1999 2000 2001 2002 2001-2002

Wood production (million cubic meters) (per cent)

Timber scaled……………………………………… 65.0 76.0 77.0 72.0 73.4 1.9

Lumber……………………………………………… 30.2 32.4 32.4 30.2 33.6 11.3

Plywood…………………………………………… 1.39 1.54 1.54 1.57 1.68 7.2

Timber scaled by species (million tonnes)

Lodgepole pine…………………………………… 17.7 22.0 22.2 22.9 n.a.

Spruce……………………………………………… 12.3 12.5 12.1 12.4 n.a.

Hemlock…………………………………………… 8.4 10.5 11.0 8.3 n.a.

Douglas fir………………………………………… 8.4 11.0 10.6 10.8 n.a.

Balsam……………………………………………… 8.0 8.8 8.9 7.1 n.a.

Cedar……………………………………………… 6.1 6.6 7.3 6.2 n.a.

All others…………………………………………… 4.1 4.6 4.9 4.5 n.a.

Total 2……………………………………………… 65.0 76.0 77.0 72.2 n.a.

(million tonnes)

Pulp and paper production………………………… 7.03 8.01 8.29 7.59 7.39 -2.6

Market pulp………………………………………… 4.46 5.00 5.15 4.71 4.49 -4.7

Newsprint, paper and paperboard……………… 2.57 3.02 3.13 2.88 3.00 4.2

Industrial product price indices (1997=100)

Softwood lumber -- British Columbia…………… 86.3 100.2 83.2 82.6 81.7 -1.1

Douglas fir plywood……………………………… 92.5 109.4 94.8 94.4 104.2 10.4

Bleached sulphate pulp…………………………… 97.8 99.4 127.7 105.7 96.1 -9.1

Newsprint for export……………………………… 111.6 96.3 105.4 123.0 96.2 -21.8

1 Percentage change based on unrounded numbers.2 Total may not add due to rounding.

Sources: Timber harvest -- Ministry of Forests

Lumber and plywood production -- Statistics Canada

Pulp and paper production -- Canadian Pulp and Paper Association

Industrial product price indices -- Statistics Canada



Table A1.11 Historical Value of Mineral, Petroleum and Natural Gas Production

Industrial Construction Natural Gas Other oil

Year Metals Materials Aggregates Coal Crude Oil 1 to Pipeline and Gas 2 Total

($ millions)

1989…………………… 1,757 125 297 1,001 263 495 25 3,963

1990…………………… 1,559 119 313 980 319 537 43 3,870

1991…………………… 1,419 86 312 938 260 562 36 3,613

1992…………………… 1,438 45 305 749 260 592 38 3,427

1993…………………… 1,198 41 335 797 233 814 42 3,460

1994…………………… 1,354 47 370 905 235 991 44 3,946

1995 …………………… 2,016 58 395 968 272 710 58 4,477

1996…………………… 1,537 42 398 1,110 441 817 75 4,420

1997…………………… 1,495 47 398 1,191 403 1,087 98 4,719

1998…………………… 1,484 49 404 1,088 373 1,154 47 4,598

1999…………………… 1,183 51 416 915 461 1,577 53 4,656

2000 …………………… 1,571 50 458 800 843 3,826 114 7,662

2001…………………… 1,394 56 457 959 729 4,834 103 8,532

2002 e………………… 1,248 49 493 1,024 703 3,471 82 7,070

e Estimate.1 Includes Pentanes and Condensate.2 LPG's and Sulphur.

Sources: Natural Resources Canada and Ministry of Energy and Mines

Table A1.12 Petroleum and Natural Gas Activity Indicators

Change

Indicator Unit of Measure 1998 1999 2000 2001 2002 2001-2002

(per cent)

Natural gas production (wellhead) 1…………… (billion cubic m) 25.3 25.9 26.6 29.9 32.4 8.4

Crude oil and condensate…………………………(million cubic m) 2.8 2.4 2.7 2.6 2.6 0.0

Wells authorized…………………………………… (number) 695 828 1010 977 876 -10.3

Wells drilled………………………………………… (number) 652 620 770 875 643 -26.5

Seismic crew-weeks……………………………… (number) 112 105 140 167 160 -4.2

Provincial reserves

Marketable gas (remaining reserves)………… (billion cubic m) 226 237 240 252 255 1.0

Oil (remaining reserves)……………………… (million cubic m) 25.0 26.0 27.4 25.5 22.6 -11.4

Provincial government petroleum

and natural gas revenue 2……………………… ($ millions) 379.6 587.3 1,306.2 1,731.1 1,232.6 -28.8

1 Includes gas retrieved from storage. During 2002, 1 billion m3 were produced from storage wells.2 Includes Crown royalties, Crown reserve disposition bonuses, fees and rentals.

Source: Ministry of Energy and Mines



Table A1.13 Supply and Consumption of Electrical Energy in British Columbia

Supply Consumption

Net Generation

Receipts Delivered

Total From Other Total To Other Total

Provincial Provinces Provincial Provinces Provincial

Year Hydro Thermal Generation and Imports Supply and Exports Consumption

(gigawatt-hours 1)

1984………………………… 50,243 2,126 52,369 1,556 53,925 8,313 45,612

1985………………………… 57,105 2,022 59,126 1,080 60,207 11,231 48,975

1986………………………… 48,923 1,836 50,759 3,345 54,104 4,709 49,395

1987………………………… 61,057 2,010 63,066 1,203 64,269 13,336 50,934

1988………………………… 58,573 2,370 60,943 2,351 63,293 9,215 54,078

1989………………………… 51,082 6,573 57,655 4,500 62,155 6,583 55,572

1990………………………… 57,245 3,417 60,662 3,233 63,895 6,689 57,206

1991………………………… 60,149 2,832 62,981 2,272 65,253 7,725 57,528

1992………………………… 60,555 3,503 64,058 2,685 66,743 9,473 57,270

1993………………………… 53,057 5,716 58,774 5,691 64,465 5,605 58,860

1994………………………… 53,979 7,036 61,015 7,836 68,851 9,541 59,311

1995………………………… 49,814 8,192 58,006 6,385 64,391 3,972 60,419

1996………………………… 67,329 4,436 71,765 3,289 75,053 10,390 64,664

1997………………………… 61,772 5,189 66,961 4,316 71,278 12,114 59,163

1998………………………… 60,849 6,861 67,710 5,056 72,766 10,619 62,147

1999………………………… 61,588 6,457 68,045 6,807 74,852 12,529 62,323

2000………………………… 59,754 8,487 68,241 6,039 74,280 10,698 63,582

2001………………………… 48,338 8,994 57,332 10,154 67,486 6,408 61,079

2002………………………… 58,660 6,227 64,888 5,793 70,680 8,168 62,512

1 Gigawatt-hour = one million kilowatt-hours.




Table A1.14 British Columbia High-Technology Sector Activity

Change

Indicator 1995 1996 1997 1998 1999 2000 2001 2000-2001

(per cent)

Number of Establishments1

Manufacturing ………………… 973 875 863 830 -3.8

Services ………………………… 3,899 4,146 4,528 4,622 2.1

Total …………………………… 4,872 5,021 5,391 5,452 1.1

Employment (persons)

Manufacturing ………………… 9,000 9,330 10,940 11,840 14,440 15,890 15,730 -1.0

Services ………………………… 22,560 21,830 23,640 21,970 24,270 27,410 29,820 8.8

Total …………………………… 31,560 31,160 34,570 33,810 38,710 43,290 45,550 5.2

Wages and Salaries ($ millions)

Manufacturing ………………… 320 351 422 488 618 690 676 -2.1

Services ………………………… 1,116 1,095 1,228 1,140 1,294 1,511 1,609 6.5

Total …………………………… 1,436 1,446 1,651 1,628 1,912 2,201 2,285 3.8

Real GDP ($ 1997 millions) ………… 2,297 2,236 2,608 2,817 3,016 3,441 3,302 -4.0

Nominal GDP ($ millions) ………… 2,283 2,179 2,608 2,716 2,961 3,435 3,449 0.4

Revenues ($ millions) ……………… 3,773 4,143 4,780 4,990 5,683 6,278 6,045 -3.7

Exports ($ millions) ………………… 562 663 837 1,011 1,065 1,133 979 -13.6

1 Data not available prior to 1998.

Source: BC STATS

Chapter Two Financial Review1

1 Financial information presented in this chapter is based on 2002/03 Public Accounts information. Figures are consistent with the government’s organization and accounting policies effective March 31, 2003, and for comparative purposes, information for prior years has been restated where practical.

36 Chapter 2 — Financial Review


2002/03 Overview

The provincial government recorded a $3.2 billion defi cit in 2002/03, an improvement of $1.2 billion compared to the budget estimate of a $4.4 billion defi cit.

The fi nal defi cit amount included:

• a CRF shortfall of $3,049 million and

• combined Crown corporation net losses of $120 million (after contributions paid to the CRF).

In 2002/03, CRF revenue totalled $22.1 billion, $109 million above budget and down 3.3 per cent from 2001/02. Higher revenue from energy and forestry resources, property transfer tax, and contributions from Crown corporations and the federal government was partially offset by reduced revenue from personal and corporation income taxes resulting from over $450 million in lower 2001 tax assessment information. Table 2.3 and Appendix Table A2.6a provide further details.

An additional $790 million of dedicated revenue was collected on behalf of, and transferred to, certain Crown corporations, agencies and other external public bodies in 2002/03. Dedicated revenues, except for amounts collected on behalf of other government jurisdictions, are included in the operating results of Crown corporations. Appendix Table A2.6b provides details of the dedicated revenue transfers.

CRF expenses were $360 million less than budget, refl ecting lower spending by ministries and reduced debt interest costs, partially offset by a one-time

Table 2.1 2002/03 Operating Results

Budget Actual Actual

2002/03 2002/03 2001/02 1

($ millions)

Consolidated revenue fund (CRF):

Revenue ……………………………………………………………………………………… 22,038 22,147 22,894

Expenditure…………….....…....………………..…………………………………………… (25,556) (25,196) (24,897)

Wind-up of Forest Renewal BC and Fisheries Renewal BC ………………………… - - 256

CRF balance ………………………………………………………………………………… (3,518) (3,049) (1,747)

Crown corporations and agencies:

Taxpayer-supported………………………………………………………………………… (206) (229) (518)

Self-supported commercial …………………………...…………………………………… 74 109 (484)

Total net contribution (loss) of Crown corporations and agencies ……………… (132) (120) (1,002)

Subtotal ………………………………………………………………………………………… (3,650) (3,169) (2,749)

Forecast allowance…………………………………………………………………………… (750) - -

(Deficit) surplus before joint trusteeship ………………………………………………… (4,400) (3,169) (2,749)

Joint trusteeship (one-time adjustment)…………………………………………………… - - 1,464

Summary accounts (deficit) surplus ……………………………………………………… (4,400) (3,169) (1,285)

1 Restated to reflect accounting policy changes in 2002/03 for certain CRF revenues and expenses. See notes to Tables 2.3 and 2.4.

Chapter 2 — Financial Review 37


$275 million provision for forestry revitalization. Before the forestry revitalization provision, ministry and debt interest savings totalled $635 million.

Combined Crown corporation net losses (after adjustments) were $12 million lower than budget, as the one-time costs of transferring BC Ferries to an independent authority were more than offset by improved results from ICBC and other Crown corporations.

Table 2.2 summarizes the major changes from the 2002/03 budget.

Table 2.2 Summary of Changes from Budget 2002/03

Final

Change Results

($ millions)

Budget deficit - 2002/03 Estimates ………………………………………………………………… (4,400)

Consolidated revenue fund (CRF) changes:

Revenue changes:

- Personal income tax - adjustment to 2001 and prior-year personal income tax …………… (311)

- Personal income tax - lower base and personal income growth in 2002 …………………… (389)

- Corporation income tax - weaker 2001 tax assessments and higher tax credits …………… (166)

- Property transfer taxes - strong housing market ………………………………………………… 110

- Other taxes ………………………………………………………………………………………… 17

- Energy-related sources - higher prices …………………………………………………………… 212

- Forests - higher harvest volumes ………………………………………………………………… 178

- Medical Service Plan premiums …………………………………………………………………… 59

- BC Hydro dividend payment to CRF ……………………………………………………………… 55

- Equalization, partly offset by lower CHST ……………………………………………………… 344 109

Spending changes:

- Ministry of Human Resources savings…………………………………………………………… 171

- Ministry of Health Services savings……………………………………………………………… 26

- Ministry of Attorney General savings……………………………………………………………… 25

- Other ministry savings……………………………………………………………………………… 91

- Contingencies savings……………………………………………………………………………… 113

- Lower debt interest costs …………………………………………………………………………… 209

- Forestry revitalization……………………………………………………………………………… (275) 360 469

Crown corporation changes:

Taxpayer-supported:

- BC Buildings - higher net income / accounting policy adjustment (revenue recognition) …… 43

- BC Ferries - costs resulting from transfer to new authority:

- write-down of PacifiCats value to sale proceeds ……………………………………… (53)

- transfer of PacifiCat sale proceeds to the CRF ………………………………………… (18)

- write-down of previous capital grants …………………………………………………… (77)

- BC Transportation Financing Authority - lower interest costs ………………………………… 36

- Other changes and adjustments ………………………………………………………………… 46 (23)

Self-supported commercial:

- BC Hydro - higher contribution paid to CRF ……………………………………………………… (55)

- BC Rail - improved results for rail operations …………………………………………………… 34

- loss on sale of discontinued operations ………………………………………………… (132)

- accounting for differences in fiscal year-ends …………………………………………. 87

- ICBC - improved operating results ………………………………………………………………… 55

- accounting for differences in fiscal year-ends …………………………………………. 35

- Other changes and adjustments ………………………………………………………………… 11 35 12

Deficit before forecast allowance…………………………………………….……………..………… (3,919)

Forecast allowance - not needed……………………………………………………………………… 750

Actual deficit - 2002/03 Public Accounts …………………………………………………………… (3,169)



The 2002/03 defi cit of $3.2 billion contrasts with a $1.3 billion defi cit recorded in 2001/02 (see Table 2.1). The difference is primarily due to the one-time $1.4 billion joint trusteeship adjustment recorded in 2001/02. Excluding this adjustment, the 2001/02 defi cit was $2.7 billion. The remaining change refl ects a 3.3 per cent decrease in CRF revenue and a 1.2 per cent increase in CRF spending, partially offset by improved Crown corporation results.

The 2002/03 defi cit was $631 million lower than the third quarter forecast released with the 2003/04 budget on February 18, 2003. This refl ects:

• $54 million of additional CRF revenue due to better-than-expected performance in last quarter natural resources revenue, partially offset by reduced federal government transfers;

• a $216 million reduction in CRF spending as many ministries and the contingencies vote spent less than forecast. Debt interest costs were also lower than forecast refl ecting reduced borrowing needs and lower interest rates;

• a $61 million improvement in Crown corporation fi nances as better year-end results for ICBC and improvements in various taxpayer-supported Crown corporations more than offset the write-down of the Pacifi Cat ferries; and

• a $300 million forecast allowance included in the third quarter forecast was not needed.

Further details on changes from the February 2003 updated forecast are provided in Appendix Table A2.4.

Consolidated Revenue Fund Revenue

Major changes from budget include:

• Personal income tax was $700 million below budget and down 23 per cent from last year. Weaker-than-assumed fi nal assessments for the 2001 tax year resulted in a $311 million reduction in revenue. The remainder of the variance refl ects the resultant effect of the lower tax base and slower personal income growth in 2002.

• Corporation income tax was $166 million below budget mainly due to weaker-than-expected fi nal tax assessments for the 2001 tax year. This was a result of lower assessments from corporations paying the general tax rate, and higher tax credits.

• Property transfer tax was $110 million above budget and 34 per cent higher than 2001/02 due to the strong housing market during the year. In the 2002/03 fi scal year, residential unit sales were 7.6 per cent higher, the average selling price was 6.7 per cent higher and housing starts were 27 per cent higher than 2001/02.

• Other taxes were $17 million above budget. The effects of stronger collections for property, corporation capital, insurance premium, and hotel room taxes were partially offset by weaker revenue from social service, tobacco and fuel taxes.

• Revenue from energy related sources (natural gas and petroleum royalties, permit and fees, minerals and sales of electricity under the Columbia



River treaty) was $212 million above budget mainly due to higher average energy prices during the year. In 2002/03, prices for natural gas ($4.20 Cdn/gigajoule at plant inlet), oil ($29 US/bbl at Cushing) and electricity ($29 US/MWh, mid Columbia price index) were all higher than the budget assumptions of $3.65/gigajoule, $20 US/bbl and $24 US/MWh, respectively.

• Forests revenue was $178 million above budget primarily due to higher-than-budgeted harvest volumes. Overall harvest volumes were 10.3 million cubic metres or 18 per cent higher than budget and 17 per cent higher than 2001/02 refl ecting industry’s resolve to lower its average costs and increase its market share. In particular, harvest volumes under the Small Business Forest Enterprise Program at 10.9 million cubic metres were 3.5 million cubic metres or 47 per cent higher than budget.

• Other revenue was $12 million above budget as higher revenue from Medical Service Plan premiums and miscellaneous sources was partly offset by lower revenue from other fees and licences, investment earnings and higher allowance for doubtful accounts.

• Contributions from government enterprises were $97 million above budget mainly due to a $55 million improvement in BC Hydro’s CRF dividend. An unexpected $18 million contribution from BC Ferries refl ects the net proceeds from the disposition of the three Pacifi Cat vessels.

• Contributions from the federal government were $337 million above budget mainly due to equalization payments from the federal government which were not included in the budget, partly offset by reduced Canada health and social transfer entitlement.

In 2002/03, the method of recording equalization revenue changed from a cash basis to an accrual basis. This resulted in prior period restatements for 1999/00 (up $125 million) and 2001/02 (down $68 million), and decreased 2002/03 revenue of $57 million.

Consolidated Revenue Fund Expense

At the completion of the fi rst year of the government’s fi rst three-year fi scal plan all ministers have met their individual responsibility for controlling government spending. All operating expenses, as identifi ed in the Summary of Ministerial Accountability for Operating Expenses — Schedule I of the 2002/03 Estimates, were at or below the targets set out under the Balanced Budget and Ministerial Accountability Act (see the Ministerial Accountability Report topic box).

Expenses totalled $25.2 billion in 2002/03, $360 million below budget and 1.2 per cent higher than 2001/02. Excluding $188 million of one-time restructuring exit costs, expenses totalled $25.0 billion, 1.1 per cent higher than the previous year.

Major budget variances included:

• $171 million below budget spending in the Ministry of Human Resources;

• $142 million below budget spending in other ministries and appropriations;

• $113 million of unused contingencies vote funding;



Table 2.3 Revenue by Source

Consolidated Revenue Fund 1

Budget Actual Actual Annual

2002/03 2002/03 2001/02 Change

Taxation Revenue: ($ millions) (per cent)

Personal income...................................................................... 4,854 4,154 5,375 (22.7)

Corporation income................................................................. 779 613 1,522 (59.7)

Social service........................................................................... 3,802 3,770 3,535 6.6

Fuel.......................................................................................... 395 393 398 (1.3)

Property................................................................................... 1,425 1,457 1,401 4.0

Property transfer...................................................................... 297 407 303 34.3

Other........................................................................................ 1,088 1,125 1,190 (5.5)

Less commissions on collection of public funds ..................... (30) (32) (36) (11.1)

Less allowance for doubtful accounts..............………………… (25) (41) (36) 13.9

12,585 11,846 13,652 (13.2)

Natural Resource Revenue:

Natural gas and petroleum ..................................................... 1,301 1,504 1,299 15.8

Columbia River Treaty............................................................. 85 100 360 (72.2)

Minerals................................................................................... 69 63 53 18.9

Forests..................................................................................... 1,145 1,323 1,109 19.3

Water resources...................................................................... 251 257 284 (9.5)

Wildlife Act - fees and licences............................................... 14 14 15 (6.7)

Less commissions on collection of public funds ..................... (1) (1) (1) -

Less allowance for doubtful accounts..............………………… (11) (5) (11) (54.5)

2,853 3,255 3,108 4.7

Other Revenue:

Medical Services Plan premiums............................................. 1,299 1,358 955 42.2

Other fees and licences........................................................... 705 691 685 0.9

Investment earnings................................................................ 50 18 64 (71.9)

Miscellaneous.......................................................................... 220 245 259 (5.4)

Asset dispositions.................................................................... - - 42 (100.0)

Less commissions on collection of public funds ..................... (14) (13) (11) 18.2

Less allowance for doubtful accounts..............………………… (66) (93) (84) 10.7

2,194 2,206 1,910 15.5

Contributions from Government Enterprises: 2

Liquor Distribution Branch ...................................................... 640 654 637 2.7

British Columbia Hydro and Power Authority .......................... 283 338 332 1.8

British Columbia Lottery Corporation ...................................... 476 489 449 8.9

Other........................................................................................ 21 36 19 89.5

1,420 1,517 1,437 5.6

Contributions from the Federal Government:

Canada health and social transfer........................................... 2,805 2,606 2,445 6.6

Equalization 3……………………………………………………… - 543 158 243.7

Other........................................................................................ 181 174 184 (5.4)

2,986 3,323 2,787 19.2

Total Revenue............................................................................ 22,038 22,147 22,894 (3.3)

1 Figures based on 2002/03 Public Accounts information. Figures exclude dedicated revenue totalling $790 million, collected

on behalf of, and transferred to, British Columbia Transit, British Columbia Ferry Corporation, BC Transportation Financing

Authority, Greater Vancouver Transportation Authority (Translink ), Forest Renewal BC, British Columbia Oil and Gas

Commission, Tourism British Columbia and other entities. These revenues are included as part of the operations of Crown

corporations and agencies with the exception of Translink and certain other public bodies that are not part of the provincial

government's summary accounts. Further information is provided in Appendix Table A2.6b.2 Payments to the CRF only. See Tables A2.11 to A2.18 for financial statements of major Crown corporations.3 Revenue has been restated for prior years reflecting a change in the method of recording equalization entitlement from cash

basis to accrual. This has the effect of increasing revenue in 1999/00 by $125 million, and reducing revenue in 2001/02

and 2002/03 by $68 million and $57 million, respectively.



Table 2.4 Expense by Ministry 1

Consolidated Revenue Fund

Allocation Budget plus

Budget of Contin- Contingencies Actual Actual Annual

2002/03 2 gencies 3 Allocations 22002/03 2001/02 2 Change 4


Legislation……………………………………… 39 - 39 37 38 (2.5)

Officers of the Legislature…………………… 32 - 32 25 45 (44.7)

Office of the Premier………………………… 50 1 51 43 54 (21.3)

Advanced Education………………………… 1,900 3 1,903 1,897 1,935 (2.0)

Agriculture, Food and Fisheries……………… 64 8 72 72 66 9.3

Attorney General……………………………… 556 - 556 531 541 (1.9)

Children and Family Development………… 1,558 11 1,569 1,569 1,525 2.9

Community, Aboriginal

and Women's Services…………………… 555 - 555 555 518 7.1

Competition, Science and Enterprise……… 54 4 58 57 73 (21.2)

Education……………………………………… 4,861 - 4,861 4,859 4,840 0.4

Energy and Mines…………………………… 50 - 50 47 67 (29.4)

Finance………………………………………… 27 - 27 27 26 3.7

Forests………………………………………… 621 3 624 618 481 28.5

Health Planning……………………………… 17 - 17 16 25 (36.1)

Health Services……………………………… 10,200 - 10,200 10,174 9,683 5.1

Human Resources…………………………… 1,789 - 1,789 1,618 1,904 (15.0)

Management Services……………………… 48 9 57 56 98 (43.3)

Provincial Revenue…………………………… 50 4 54 49 54 (8.5)

Public Safety and Solicitor General………… 506 19 525 525 522 0.5

Skills Development and Labour……………… 29 - 29 24 30 (18.8)

Sustainable Resource Management………… 118 7 125 125 130 (3.7)

Transportation………………………………… 739 10 749 748 708 5.7

Water, Land and Air Protection……………… 162 - 162 162 211 (23.1)

Other Appropriations:

Management of Public Funds

and Debt………………………………… 920 - 920 711 761 (6.7)

BC Family Bonus…………………………… 91 - 91 88 103 (14.7)

Government Restructuring 5……………… 230 - 230 212 81 162.5

Contingencies (All Ministries)

and New Programs 3…………………… 210 (97) 113 - - -

Forestry Restructuring…………………… - - - 275 - -

Skeena Cellulose Inc. Assistance………… - - - - 307 (100.0)

Other Appropriations 6……………………… 80 18 98 76 71 8.6

Total Expense 5……………………………… 25,556 - 25,556 25,196 24,897 1.2

1 Figures based on 2002/03 Public Accounts information.

2Actual figures for 2001/02 and budget figures for 2002/03 have been restated to reflect the government's organization and accounting policy effective

March 31, 2003. 2001/02 actual expense has been decreased by $16 million due to a change in the basis for recognizing silviculture liabilities arising

under the Small Business Forest Enterprise Program.3

Permitted charges to the Contingencies vote fall under the responsibility of the Minister of Finance. For comparative purposes only, charges to the

Contingencies vote of $97 million in 2002/03 ($181 million in 2001/02) have been allocated to individual ministry spending.4

Percentage change between 2002/03 actual and 2001/02 actual (calculated from unrounded figures).5

Includes restructuring exit costs of $188 million ($161 million in 2001/02), funded from the Government Restructuring (All Ministries) vote and ministry

budgets (see Appendix Tables A2.10a and A2.10b).6

Other Appropriations include: Commissions on Collection of Public Funds and Allowances for Doubtful Revenue Accounts, Environmental

Assessment Office, Environmental Boards and Forest Appeals Commission, Forest Practices Board, Public Sector Employers' Council, Seismic

Mitigation, Insurance and Risk Management, and Unclaimed Property.



• $209 million of reduced debt interest costs;

partially offset by

• a $275 million funding provision for forestry revitalization.

As a result of effective management of ministry budgets and earlier-than-expected progress in meeting three-year service plan targets, ministries addressed some one-time funding needs in a number of priority areas. This included a one-time special provision of $275 million for costs associated with revitalization of the forestry sector, and commitments to health care, education, children and other priorities.

In 2002/03, fi ve ministries — Health Services, Education, Advanced Education, Human Resources, and Children and Family Development — accounted for about 80 per cent of total CRF expense. Interest payments on the government’s direct operating debt accounted for about 3 per cent of expense.

During 2002/03 the contingencies vote funded $97 million of new initiatives and unforeseen requirements. In addition, the government passed legislation to authorize a $275 million provision to support revitalization of the forest sector. Legislation in various programs also provided statutory authority to pay for additional costs.

Signifi cant areas of spending and changes from budget included:

• Ministry of Advanced Education spending was slightly below budget. Spending refl ected higher-than-planned contributions to educational institutions and organizations, higher spending for student fi nancial assistance and completion of the provincial commitment to fund Leading Edge Endowments. This was offset by lower interest costs for capital-related debt, amortization and other areas. Compared to the previous year, spending fell 2.0 per cent mainly due to one-time restructuring costs that occurred in 2001/02. Total funded post-secondary full-time equivalent student spaces increased to 157,694 in 2002/03 from 154,991 in the previous year (up 1.7 per cent). Average per student funding increased by 1.3 per cent.

• Ministry of Attorney General was $25 million below budget mainly due to lower-than-expected costs for First Nation treaty arrangements.

• Ministry of Children and Family Development was on budget as savings from some programs were used to fund priority investments such as school based programs, early childhood development and restructuring in community living services and other areas. During the year, the children-in-care average caseload declined 6.5 per cent.

• Ministry of Education spending was slightly below budget. Lower interest costs for capital-related debt and lower amortization expenses helped to provide extra funding for school boards and independent schools at year-end. In 2002/03, public school full-time enrolment declined from 594,554 to 587,247, or 1.2 per cent, while independent school enrolment rose 4.4 per cent from 2001/02. Average per pupil funding for public schools increased by 1.9 per cent.

• Ministry of Forests expense was up $137 million from 2001/02 as higher Small Business Forest Enterprise expenses (due to higher-than-expected



activity) and funding for the new Forest Investment vote were partially offset by lower fi re suppression costs. The forest investment program was established to provide for the operation and management of forest investments and international marketing. These services were previously carried out by Forest Renewal BC, which was wound up in 2001/02.

Forestry Revitalization — In March 2003, legislation was passed to provide $275 million to assist in the transition to a sustainable forestry sector. Of this, $200 million has been set aside to provide for compensation to those companies that are returning some of their logging rights to the Crown. As well, the $75 million BC Forestry Revitalization Trust will provide assistance to forest workers and contractors impacted by the forest policy changes.

• Ministry of Health Services was $26 million below budget. Higher regional health sector funding, emergency health care services and Pharmacare costs were offset by lower-than-expected spending for the Medical Services Plan and capital-related debt interest costs. Ministry spending was up 5.1 per cent from 2001/02, refl ecting signifi cant increases in most areas.

• Ministry of Human Resources was $171 million below budget and $286 million lower than the previous year. This refl ects a continuing downward trend in the employment assistance caseload and average costs per case. The average monthly assistance caseload of 130,524 was 11 per cent below budget and 16 per cent lower than in 2001/02.

• Ministry of Public Safety and Solicitor General met its budget as savings in corrections and other program areas helped offset higher policing costs related to the Port Coquitlam missing persons investigation.

• Ministry of Water, Land and Air Protection spending was on budget and $49 million lower than the previous year mainly due to one-time costs for Britannia Mine site remediation that occurred in 2001/02.

• The Contingencies and New Programs Vote funded $97 million of new initiatives and unforeseen requirements in 2002/03.

Table 2.5 Contingencies and New Programs (All Ministries) Vote - 2002/03


($ millions)

Okanagan Valley Tree Fruit Authority transition…………………………………… 7.6

School-based programs……………………………………………………………… 10.5

Pacific National Exhibition contribution…………………………………………… 3.7

Seismic mitigation commitments…………………………………………………… 18.6

Softwood Lumber legal costs……………………………………………………… 2.8

Increase in workers' compensation liability (public sector share)……………… 7.3

Employee benefits costs…………………………………………………………… 1.7

Juno Beach Memorial………………………………………………………………… 1.0

Lieutenant Governor Awards Fund………………………………………………… 0.7

BC Achievements Award Fund……………………………………………………… 6.0

Missing persons investigation……………………………………………………… 7.6

Emergency roads repair from flooding……………………………………………… 11.8

Muskwa-Kechika trust fund contribution…………………………………………… 2.1

Interest liability for tenure compensation (protected areas)……………………… 4.9

Public Transit - write-off of deferred capital costs………………………………… 10.5

Other……………..………………………………………………………………..…… 0.1 Total…………………………………………………………………………………… 96.9



The Ministerial Accountability Report is a requirement of the Balanced Budget and Ministerial Accountability Act (BBMAA). This act establishes individual and collective accountability through fi nancial and performance targets. Cabinet ministers are collectively accountable for achieving an overall government bottom-line target. Financial targets for ministers, performance targets for ministers of state and a revenue target for the Minister of Provincial Revenue comprise the individual accountability measures.

During the year, 20 per cent of ministerial salary for the Premier, each minister and minister of state is withheld. Each minister earns back 10 per cent upon meeting his or her individual budget or performance targets, and the remaining 10 per cent if the government as a whole comes in on or under budget.

Based on the audited fi nancial results for the 2002/03 fi scal year, the Ministerial Accountability Report compares the expected targets that the Premier and ministers must achieve in order to earn their 20 per cent salary holdback with

actual fi nancial or performance results. Under BBMAA, actual fi nancial results are compared to individual ministry and collective bottom-line targets presented in the provincial budget and estimates, and performance results are compared to ministry service plans.

Except for two Ministers of State whose performance measurement data was not available in June 2003, all ministers met their requirements and received their salary holdbacks for 2002/03. Canadian Institute of Health Information data for measuring performance results will not be available until September 2003 for the Ministers of State for Mental Health and for Intermediate, Long-Term and Home Care. A report comparing targets to actual results must be presented prior to the end of the 2003 calendar year before these two ministers are eligible to receive their individual salary holdbacks.

For more information on the Ministerial Accountability Report, please refer to the Ministry of Finance Web site at http://www.gov.bc.ca/fi n/

Ministerial Accountability Report

Summary of Operational Results

Targets

Met

Individual Accountability - Performance Outcomes

Minister of State for Intergovernmental Relations ÕMinister of State for Early Childhood Development ÕMinister of State for Community Charter and 2010 Winter Olympic Bid ÕMinister of State for Women’s Equality ÕMinister of State for Deregulation ÕMinister of State for Mental Health Pending**

Minister of State for Intermediate, Long-term and Home Care Pending**

**Data from the Canadian Institute for Health Information required for measuring performance results for the Ministers of State for Mental Health and for Intermediate, Long-Term and Home Care is not available until the fall. These two ministers are required to report out by December 31, 2003. The Comptroller General will then issue an update to the Ministerial Accountability Report.





Summary of Financial Targets and Results

Expected

Result

Actual

Result

Targets

Met

$000's $000's

Collective Accountability

Summary Deficit for fiscal 2002/03 (BBMAA)* 4,400,000 3,111,698 Õ*Actual result for summary deficit under the BBMAA removes the effect of an in-year $58 million adjustment that results from a change in accounting policy. The BBMAA does not allow accounting policy changes to affect summary deficit figures for which ministers are accountable.

Individual Accountability - Expenditure Management

Premier 49,727 41,587 ÕMinister of Advanced Education 1,899,696 1,894,051 ÕMinister of Agriculture, Food and Fisheries 64,078 64,074 ÕAttorney General and Minister Responsible for Treaty Negotiations 556,228 530,762 ÕMinister of Children and Family Development 1,558,430 1,558,430 ÕMinister of Community, Aboriginal and Women's Services 554,828 554,613 ÕMinister of Competition, Science and Enterprise 53,680 53,549 ÕMinister of Education 4,861,081 4,859,206 ÕMinister of Energy and Mines 50,144 47,012 ÕMinister of Finance 1,547,802 1,182,926 ÕMinister of Forests 901,541 895,131 ÕMinister of Health Planning 16,633 15,953 ÕMinister of Health Services 10,202,266 10,175,796 ÕMinister of Human Resources 1,789,143 1,618,251 ÕMinister of Management Services 47,843 46,776 ÕMinister of Public Safety and Solicitor General 506,491 505,243 ÕMinister of Skills Development and Labour 28,728 24,030 ÕMinister of Sustainable Resource Management 121,416 121,318 ÕMinister of Transportation 738,505 738,087 ÕMinister of Water, Land and Air Protection 163,480 163,048 ÕIndividual Accountability - Revenue

Minister of Provincial Revenue 7,000 150,000 Õ



• Management of Public Funds and Debt (debt interest) was $209 million below budget due to signifi cantly lower-than-assumed borrowing requirements, lower interest rates, a stronger Canada/U.S. exchange rate and a change in borrowing strategy to take advantage of low short-term interest rates. Government operating debt requirements were $1.7 billion below budget. The average long-term interest rate was 0.8 percentage points lower than assumed, while the average short-term interest rate was 0.1 percentage point lower. These factors also contributed to a 6.7 per cent drop in interest costs compared to the previous year.

• Government Restructuring (All Ministries) — Government has now completed the second year of the three-year $550 million restructuring plan for the Consolidated Revenue Fund (CRF) set out in the 2002/03 budget. CRF expenses for 2002/03 were $219 million compared to $168 million for 2001/02 (see Table 2.6). See Appendix Table A2.10a for details on total restructuring expenses (including Crown corporations).

Crown Corporation Results

Taxpayer-supported Crown Corporations and Agencies

Combined taxpayer-supported net losses of $229 million (after adjustments and contributions to the CRF) were $23 million higher than budget.

Major changes from budget included the following:

• BC Buildings realized additional net income of $18 million compared to budget primarily due to one-time items. The government-wide restructuring program caused some early lease terminations of special purpose properties resulting in early cost recoveries ($13 million). Also, the corporation experienced higher net gains on property sales.

Table 2.6 Government Restructuring 1

Consolidated Revenue Fund (CRF)

2001/02 2002/03

($ millions)

• Exit Costs:

Funded by Government Restructuring vote……………………………………… 81 185

Funded by ministry budgets………………………………………………………… 23 3

Funded by Contingencies vote……………………………………………………… 57 -

161 188

• Non-Exit Costs:

Funded by Government Restructuring vote……………………………………… - 27

Funded by ministry budgets………………………………………………………… 2 4

Funded by Contingencies vote……………………………………………………… 5 -

7 31 Total CRF restructuring…………………………………………………………… 168 219

1 Accounting policy divides restructuring costs into exit costs related to charges that have no future

value to government and non-exit restructuring costs for charges that do provide future benefits.

For further details see Appendix Table A2.10b.



• BC Ferries was $45 million below budget as a further $53 million write-down of the Pacifi Cat ferries was recorded as a result of their auction in March 2003. This sale was prior to devolution of BC Ferries to an independent, regulated authority in April 2003. The write-down was partially offset by a $8 million improvement in operating results.

The provincial government also expensed $77 million in previous capital grants to the corporation, which is included in the accounting adjustments to the taxpayer-supported Crown corporation results.

The Pacifi Cat ferries auction proceeds of $18 million were transferred to the CRF as part of the contributions from taxpayer-supported Crown corporations.

• BC Transportation Financing Authority showed a $36 million improvement mainly due to lower debt servicing costs.

Table 2.7 2002/03 Crown Corporation and Agency Operating Results


2002/03 2002/03 2001/02 1

($ millions)

Taxpayer-supported:

British Columbia Buildings Corporation …………………………………………………… 34 52 37

British Columbia Ferry Corporation ………………………………………………………… 16 (29) (23)

BC Transportation Financing Authority ……………………………………………………… (56) (20) -

Forest Renewal BC …………………………………………………………………………… - - (179) 552513 British Columbia Ltd. (Skeena Cellulose Inc.) …………………………………… - (4) (69) Other …………………………………………………………………………………………… 3 10 (6)

Accounting adjustments 2 ………………………………………………………………… (184) (204) (225)

Debt assistance for Skeena Cellulose Inc. ……………………………………………… - - 220

Taxpayer-supported results before contributions to CRF …………………………… (187) (195) (245)

Less: Contributions paid to CRF………………………………………………………… (19) (34) (17)

Transfer to the CRF for the wind-up of Forest Renewal BC

and Fisheries Renewal BC …………………………………………………… - - (256)

Taxpayer-supported net results …………………………………………………………… (206) (229) (518)

Self-supported commercial:

British Columbia Hydro and Power Authority - net income …………………………… 345 418 403

Reversal of rate stabilization account transfer impact on net income ………………… 5 (66) (145)

British Columbia Hydro and Power Authority - operating results ………………………… 350 352 258

Liquor Distribution Branch …………………………………………………………………… 640 654 637

British Columbia Lottery Corporation ……………………………………………………… 660 671 606

British Columbia Railway Company ………………………………………………………… 14 (84) (107)

Insurance Corporation of British Columbia ………………………………………………… (10) 45 (251)

Other …………………………………………………………………………………………… 5 14 -

Accounting adjustments 3 ………………………………………………………………… (184) (60) (207)

Self-supported commercial results before contributions to the CRF ……………… 1,475 1,592 936

Less: Contributions paid to CRF ………………………………………………………… (1,401) (1,483) (1,420)

Self-supported commercial net results …………………………………………….. 74 109 (484)

Total net (loss) contribution of Crown corporations and agencies …………………… (132) (120) (1,002)

1Restated to be consistent with the presentation used for 2002/03.

2Primarily reflects the amortization of the cost of highways transferred to the BC Transportation Financing Authority in 1998/99. The 2001/02 adjustment

includes a write-down resulting from the disposal of Skeena Cellulose Inc. ($67 million), and the 2002/03 adjustment includes the write-down of previous

capital grants to BC Ferries ($77 million).3

Primarily reflects transfers of BC Lottery revenue to charities and local governments ($181 million), partially offset by adjustments to account for

differences between the fiscal year ends of the government and BC Rail ($88 million) and ICBC ($35 million).



Commercial Crown Corporations

Commercial Crown corporations recorded combined net results of $109 million (after adjustments and contributions to the CRF) compared to budgeted net results of $74 million.

Major changes from budget included the following:

• BC Hydro’s better than expected operating results were offset by $37 million in restructuring costs. As a result, the $352 million operating income (before rate stabilization transfers) was virtually unchanged from budget. An accounting policy change approved by the BC Utilities Commission for rate setting and reporting purposes resulted in a higher level of equity than assumed in the budget. Since BC Hydro's contribution to the CRF is based on an allowed return on equity, the higher equity resulted in a higher-than-anticipated contribution to the CRF.

• The Liquor Distribution Branch and BC Lotteries earnings were $14 million and $11 million, respectively, higher than expected. These improvements resulted in higher contributions to the CRF.

• For the year ended December 31, 2002, BC Rail reported a net loss of $84 million after including the $140 million impact of discontinued operations. The loss from discontinued operations included a $124 million write-down of Vancouver Wharves. Part of this write-down ($58 million) was estimated during the fi rst quarter of 2002 and was refl ected in the 2001/02 Public Accounts. As well, BC Rail completed the sale of Canadian Stevedoring and Casco Terminals in February 2003, with the $36 million gain on sale refl ected in the 2002/03 Public Accounts.

Excluding the impact of discontinued operations, BC Rail’s consolidated net income from continuing operations was $56 million refl ecting a $51 million improvement over the previous year mainly due to a 3.8 per cent increase in revenue and a 9.2 per cent reduction in operating expenses.

In total, BC Rail's results for the fi rst quarter of 2003 were an $88 million improvement over the same period in 2002, resulting in a positive adjustment to match the corporation’s fi scal year to that of the provincial government.

• ICBC reported a net income of $45 million for the year ended December 31, 2002, a $55 million improvement over the budgeted loss of $10 million. The change from budget was mainly due to:

– a 2.1 per cent increase in premium revenue (partially due to the 7.4 per cent rate increase announced in November 2001);

– a 10 per cent decrease in operating costs;

partially offset by:

– a 1.9 per cent increase in claims costs (primarily due to a 13 per cent increase in the average cost per claim, partially offset by an 11 per cent decrease in the number of claims); and

– lower-than-expected investment earnings.



ICBC’s results for the fi rst quarter of 2003 were signifi cantly higher than the same period in 2002, resulting in a $35 million positive adjustment to match the corporation’s fi scal year to that of the provincial government.

Five-year fi nancial statements for the above Crown corporations are presented in Appendix Tables A2.11 to A2.18.

Full-Time Equivalents (FTEs)

Staff utilization is measured in full-time equivalents. FTEs are calculated by dividing the total hours of employment paid for in a given period by the number of hours an individual, full-time person would normally work in that period. FTE amounts do not equate to the actual number of employees.

FTEs were 2,413 below budget and 4,397 lower than the previous year (see Table 2.8). In 2002/03, the reduction in FTEs was primarily due to earlier than anticipated staffi ng reductions resulting from the implementation of core review recommendations, accelerated implementation of ministry service plan reductions, and higher-than-expected participation in voluntary departure and early retirement programs.

Provincial Capital Spending

Capital spending is required to build, acquire or replace assets such as roads, schools, post-secondary facilities, hospitals and related major equipment.

Capital spending does not fl ow directly to the government’s annual surplus or defi cit. Generally accepted accounting principles require capital costs to be spread out over the useful lives of the related assets through annual amortization expenses (see Appendix Table A2.1).

Capital spending in 2002/03 totalled $2.1 billion, $674 million below budget:

• Taxpayer-supported capital spending includes schools, hospitals, post-secondary facilities and transportation projects, plus minor capital spending by ministries and other minor taxpayer-supported agencies. In 2002/03, spending of $1.1 billion was $538 million below budget due to reduced spending for health and education facilities, transportation projects, and ministry minor capital purchases. This was partially offset by the purchase of land for expansion of the Vancouver Convention and Exhibition Centre, which was not originally budgeted to occur in 2002/03.

Table 2.8 Full-Time Equivalents (FTEs) Utilization


2002/03 2002/03 2001/02

Consolidated revenue fund (ministries

and special offices)………………………… 31,608 29,751 33,214

Taxpayer-supported Crown corporations

and agencies………………………………… 8,800 8,244 1 9,178

Total………………………… 40,408 37,995 42,392

1Includes third quarter forecasts for Canadian Blood Services and the Forensic Psychiatric Services

Commission. No estimates for these organizations were included in the 2002/03 Public Accounts .



• Self-supported commercial Crown corporation capital spending includes projects undertaken by BC Hydro, BC Rail, ICBC and for Columbia River power projects. Spending for these agencies totalled $925 million and was $136 million below budget mainly due to reduced spending by ICBC and deferred Columbia River power projects.

Provincial Debt

The government and its Crown corporations borrow to fi nance their own operations (for example, when revenues fall short of expenses), to fi nance construction of capital projects or other investments, to refi nance maturing debt and to fi nance working capital needs.

Provincial debt totalled $36.6 billion at March 31, 2003, or 27.2 per cent of provincial GDP (see Table 2.10 and Appendix Table A2.19). Total debt was $4.2 billion below budget refl ecting lower-than-forecast debt balances at the end of the 2001/02 fi scal year, improved government operating results, reduced capital spending, reduced working capital requirements and non-utilization of the forecast allowance.

Table 2.9 Capital Spending


2002/03 2002/03 2001/02 Change


Taxpayer-supported

Education…………………………………………………………… 466 367 360 1.9

Health 1……………………………………………………………… 273 117 169 (30.8)

BC Transportation Financing Authority…………………………… 254 255 324 (21.3)

BC Ferries…………………………………………………………… 103 58 57 1.8

Rapid Transit Project 2000 1 ……………………………………… 143 59 199 (70.4)

Ministry minor capital……………...………………………………… 301 183 203 (9.9)

Other 2………………………………………………………………… 129 92 103 (10.7)

Total taxpayer-supported………………………………………… 1,669 1,131 1,415 (20.1)

Self-supported commercial

BC Hydro……………………………………………………………… 745 741 545 36.0

BC Rail……………………………………………………………..… 66 52 78 (33.3)

Columbia River power projects 3…………………………………… 86 54 118 (54.2)

Insurance Corporation of British Columbia 4 ………………….… 116 41 107 (61.7)

BC Lotteries………………………………………………………..… 26 28 20 40.0

Liquor Distribution Branch………………………………………… 22 9 26 (65.4)

Total self-supported commercial ……………………………… 1,061 925 894 3.5

Total capital spending…………………………………………… 2,730 2,056 2,309 (11.0)

1Net of expenditures by hospital districts for cost-shared projects and capital spending on behalf of, and recovered from,

the Greater Vancouver Transportation Authority (TransLink ).2

Includes BC Housing Management Commission, Provincial Rental Housing Corporation, BC Buildings Corporation, Ministry of

Attorney General, Ministry of Public Safety and Solicitor General, Ministry of Children and Family Development, BC Transit and

purchase of land for expansion of the Vancouver Convention and Exhibition Centre.3

Columbia Power Corporation and Columbia Basin Trust.4

Includes ICBC Properties Ltd.



Taxpayer-supported Debt

Taxpayer-supported debt increased by $1.9 billion to total $29.1 billion at year-end (21.6 per cent of GDP). This was $2.5 billion below budget, mainly refl ecting:

• lower-than-forecast debt balances at the end of the 2001/02 fi scal year;

• lower borrowing requirements for government’s consolidated revenue fund due to better-than-expected operating results, lower ministry minor capital spending, reduced working capital requirements and higher cash balances at the start of the fi scal year; and

• reduced capital spending for education, health and transportation projects.

Self-supported Debt

Self-supported debt totalled $7.5 billion at March 31, 2003 (5.6 per cent of GDP). Debt at year-end was $1.2 billion lower than the previous year (mainly due to draw-down of cash held in the warehouse borrowing program) and $880 million below plan mainly refl ecting:

• lower-than-forecast debt balances at the end of the 2001/02 fi scal year;

• better foreign exchange rates and decreased working capital requirements for BC Hydro;

• use of asset sale proceeds to pay down debt of BC Rail; and

• deferred capital projects and other decreased working capital requirements for Columbia River power projects.

Table 2.11 shows a summary of debt changes from the 2002/03 budget.

Table 2.10 Provincial Debt Summary 1


2002/03 2002/03 2001/02 Change


Taxpayer-supported debt

Provincial government direct operating…………………..………… 17,182 15,453 13,789 12.1

Education facilities…………………………………………………… 6,012 5,793 5,517 5.0

Health facilities………………………………………………………… 2,199 2,004 1,920 4.4

Highways, ferries and public transit………………………………… 5,060 4,786 4,639 3.2

Other 2………………………………………………………………… 1,148 1,024 1,312 (22.0)

Total taxpayer-supported debt……………………………………… 31,601 29,060 27,177 6.9

Self-supported debt

Commercial Crown corporations and agencies…………………… 8,377 7,497 7,674 (2.3)

Warehouse borrowing program……………………………………… - - 1,067 (100.0)

Total self-supported debt…………………………………………… 8,377 7,497 8,741 (14.2)

Forecast allowance…………………………………………………… 750 - - -

Total provincial debt…………………………………………………… 40,728 36,557 35,918 1.8

1Debt is after deduction of sinking funds and unamortized discounts, and excludes accrued interest. Government direct and

fiscal agency accrued interest is reported in the government's accounts as an accounts payable.2

Includes government services Crown corporations and agencies, other fiscal agency loans, student assistance loans, loan

guarantees to agricultural producers, guarantees issued under economic development and home mortgage assistance

programs, and loan guarantee provisions.



Although the summary accounts defi cit was $3.2 billion, total provincial debt only increased $639 million. This was due to numerous factors including non-cash items included in the defi cit (primarily amortization costs), the draw-down of previously borrowed funds from the warehouse program, timing differences between accrued revenue/expenses and actual cash receipts/disbursements, and changes in working capital items such as accounts receivable and accounts payable. Table 2.12 provides a reconciliation between the summary accounts defi cit and the total provincial debt increase.

Table 2.11 Summary of Debt Changes from the 2002/03 Budget

Final

Change Results

($ millions)

Provincial debt at March 31, 2003 - 2002/03 budget 40,728

March 31, 2002 year-end changes between budget forecast

and the 2001/02 Public Accounts

Taxpayer-supported debt…………………………………………………………………………………… (193)

Self-supported commercial…………………………………………………………………………….. (241)

Adjusted provincial debt at March 31, 2003 - post Public Accounts 40,294


Provincial government operating:

- improved CRF operating results……………………………………………………………………… (469)

- higher cash balances at the start of the fiscal year………………………………………………… (122)

- reduced working capital requirements and cash/accrual timing differences…………………… (933)

- lower ministry minor capital spending……………………………………………………………… (118)

Education and health facilities - mainly reduced capital spending……………………………………… (292)

Highways, ferries and public transit (lower capital spending and reduced

working capital requirements)…………………………………………………………………………… (262)

BC Buildings (lower capital spending and reduced working capital requirements)…………………… (81)

Other (mainly lower debt guarantees)…………………………………………………………………… (71)

Total taxpayer-supported………………………………………………………………………………… (2,348)


BC Hydro - improved foreign exchange rates and decreased working capital requirements……… (400)

BC Rail - mainly proceeds from sale of assets…………………………………………………………… (124)

Columbia River power projects - deferred capital spending and other decreased

working capital requirements…………………………………………………………………………… (112)

Other………………………………………………………………………………………………………… (3) (639)

Debt forecast allowance not needed………………………………………………………………………… (750)

Provincial debt at March 31, 2003 - 2002/03 Public Accounts …………………………………………… 36,557

Table 2.12 Reconciliation of Summary Deficit to Debt Increase - 2002/03

($ millions)

Summary deficit………………………………………………………………………… 3,169

Taxpayer-supported capital expenditures…………………………………………… 1,131

Non-cash items included in the deficit………………………………………………… (1,359)

Reduction in warehouse debt………………………………………………………… (1,067)

Higher cash balances at the start of the year………………………………………… (122)

Cash sources from working capital items (e.g. loans, accounts receivable etc.)… (697)

Sinking fund changes and lower debt guarantees…………………………………… (239)

Self-supported Crown corporations debt changes……………………...…………… (177) Total provincial debt increase……………………………………………………… 639



Credit Rating

A credit rating is an evaluation of a borrower’s ability to pay interest and to repay principal. A credit rating affects the borrower’s debt servicing costs and the investor’s rate of return since an investor will demand a higher interest rate on a higher-risk, lower-rated security. Table 2.13 provides an interprovincial comparison of credit ratings.

The ratio of taxpayer-supported debt relative to gross domestic product is a measure often used by investors and credit rating agencies when analyzing a province’s ability to manage its debt load. British Columbia’s taxpayer-supported debt is one of the lowest in Canada, and this translates into a strong credit rating and lower debt service costs.

Debt Indicators

Table 2.14 provides a historical summary of fi nancial indicators that are used to depict the province's debt position, recent borrowing trends and the impact of debt on fi scal operating results.

Table 2.13 Interprovincial Comparison of Credit Ratings, June 2003

Rating Agency1

Moody’s Investors Standard and Dominion Bond

Province Service Poor’s Rating Service

British Columbia………………………... Aa2 AA- AA (Low)

Alberta………………..…………………… Aaa AAA AAA

Saskatchewan…………………………… Aa3 A+ A

Manitoba………………………………… Aa2 AA- A

Ontario…………………………………… Aa2 AA AA

Quebec…………………………………… A1 A+ A

New Brunswick………………………… A1 AA- A

Nova Scotia……………………………… A3 A- BBB (High)

Prince Edward Island…………………… A2 Not Rated A (Low)

Newfoundland…………………………… A3 A- BBB

1The rating agencies assign letter ratings to borrowers. The major categories, in descending order of credit quality are: AAA/Aaa; AA/Aa; A; BBB/Baa; BB/Ba; and B. The “1”, “2”, “3”, “high”, “low”, “+”, and “-“ modifiers show relative standing within the major categories. For example, AA+ exceeds AA and Aa2 exceeds Aa3.



Table 2.14 Key Debt Indicators

Budget Actual

1998/99 1999/2000 2000/01 2001/02 2002/03 2002/03

Debt to revenue (per cent)

Total provincial..........……………………… 103.1 102.0 83.4 95.3 120.1 104.8

Taxpayer-supported.....…………………… 99.7 101.1 90.3 104.1 127.9 115.9

Debt per capita ($) 1

Total provincial..........……………………… 8,071 8,559 8,345 8,757 9,866 8,827

Taxpayer-supported.....…………………… 5,805 6,251 6,157 6,626 7,655 7,017

Debt to GDP (per cent) 2



Interest bite (cents per dollar of revenue) 3



Interest costs ($ millions)

Total provincial..........……………………… 2,452 2,528 2,604 2,422 2,628 2,231

Taxpayer-supported.....…………………… 1,723 1,785 1,871 1,724 2,007 1,663

Interest rate (per cent) 4

Taxpayer-supported.....……………………. 7.6 7.4 7.5 6.6 6.8 5.9

Background Information:

Revenue ($ millions) 5

Total provincial 6............…………………… 31,294 33,804 40,618 37,689 33,918 34,887

Taxpayer-supported 7..……………………… 23,285 24,909 27,690 26,108 24,703 25,076

Total debt ($ millions)

Total provincial..............…………………… 32,261 34,478 33,880 35,918 40,728 36,557

Taxpayer-supported 8..……………………… 23,204 25,181 24,998 27,177 31,601 29,060

Provincial GDP

($ millions) 9..............………………………. 115,641 120,599 129,356 130,859 130,100 134,365

Population (thousands at July 1) 10.......………. 3,997 4,028 4,060 4,102 4,128 4,141

1 The ratio of debt to population (e.g. debt at March 31, 2003 divided by population at July 1, 2002).2 The ratio of debt outstanding at fiscal year end to provincial nominal gross domestic product (GDP) for the calendar year

ending in the fiscal year (e.g. debt at March 31, 2003 divided by 2002 GDP).3 The ratio of interest costs (less sinking fund interest) to revenue. Figures include capitalized interest expense in order to

provide a more comparable measure to outstanding debt.4 Weighted average of all outstanding debt issues.5 Revenue has been restated for prior years reflecting a change in accounting policy for equalization entitlements from a

cash basis to an accrual basis. This had the effect of increasing 1999/00 revenue by $125 million, and reducing

2001/02 and 2002/03 revenue by $68 million and $57 million, respectively.6 Includes revenue of the consolidated revenue fund plus revenue of all Crown corporations and agencies.7 Excludes revenue of commercial Crown corporations and agencies.8 Excludes debt of commercial Crown corporations and agencies (including non-guaranteed debt) and funds held under the

province's warehouse borrowing program.9 GDP for the calendar year ending in the fiscal year (e.g. GDP for 2002 is used for the fiscal year ended March 31, 2003).

10 Population at July 1st within the fiscal year (e.g. population at July 1, 2002 is used for the fiscal year endedMarch 31, 2003).

Appendix 2

56 Appendix 2 — Financial Review


Government's Financial Statements

The government conducts its activities through ministries, Crown corporations and agencies, and what is known as the SUCH sector (school districts, universities, colleges, and health care facilities and organizations). Information on the combined fi nancial results of the government and its Crown corporations and agencies is presented in the government's summary fi nancial statements, which are published in the annual Public Accounts. The SUCH sector, consistent with the legislated requirement to fully comply with generally accepted accounting principles (GAAP), will be included in the summary fi nancial statements beginning in 2004/05.


The accounts relating to the government's direct activities are contained in the consolidated revenue fund which consists of a main operating account and various special accounts. The consolidated revenue fund comprises all money over which the legislature has the power of appropriation.

The fi nancial results of the consolidated revenue fund are reported as a separate entity in the Public Accounts. Revenue and expenditure are recorded on an accrual basis of accounting, with certain limited exceptions. Assets are recorded to the extent that they represent fi nancial claims by the government upon outside parties; are items held for resale, prepaid expenses, deferred charges, or prepaid capital advances; or are tangible capital assets acquired. Similarly, liabilities are recorded only if they represent actual or probable fi nancial claims against the government.

Crown corporations and agencies

Crown corporations and agencies may be classifi ed as either taxpayer-supported or self-supported. Taxpayer-supported Crown corporations and agencies may sell services directly to the public, but their revenue may not cover operating expenses and debt servicing payments. In these cases, the government provides some grants or other forms of assistance to them, including the dedication of provincial revenue. This category also includes Crown corporations whose primary purpose is to provide services to the government. Self-supported Crown corporations and agencies do generate suffi cient revenue to cover operating and debt service costs, and may pay dividends to the provincial government. The operations of Crown corporations and agencies are recorded in their own fi nancial statements, which are subject to audit by the Auditor General or by private-sector auditors. As individual Crown corporations and agencies publish their own fi nancial statements, only summarized fi nancial information is provided in the Public Accounts.

Summary fi nancial statements

The fi nancial results of the consolidated revenue fund and the Crown corporations and agencies are combined into the summary fi nancial statements (see Chart A2.1). Where the accounting policies of taxpayer-supported Crown corporations and agencies differ from those used by central government to prepare its own consolidated revenue fund fi nancial statements, the Crown

Appendix 2 — Financial Review 57


corporation and agency fi nancial statements include adjustments to conform to government’s accounting policies unless they are following the norms for their industry.

Chart A2.1 Summary Financial Statements Components

Currently, as is the practice of many other jurisdictions in the rest of Canada, the summary fi nancial statements do not include all of the fi nancial results of the SUCH sector, although the government publishes SUCH sector fi nancial information in supplemental schedules to the Public Accounts. The government has passed legislation requiring that its fi nancial statements fully conform to GAAP beginning with fi scal year 2004/05. Therefore, appropriate SUCH sector fi nancial results will be fully combined with the summary fi nancial statements beginning in 2004/05. Had it been included in 2002/03, the SUCH sector would have reduced the defi cit by $243 million, and increased fi nancial assets by $3.4 billion, liabilities by $3.7 billion and non-fi nancial assets by $3.6 billion.

In this appendix, current and historical operating results are presented in accordance with the government's accounting polices effective March 31, 2003.

The Financial Cycle

The Budget Transparency and Accountability Act (BTAA) outlines government’s reporting requirements during the fi nancial cycle and imposes specifi c reporting deadlines or release dates for these publications. In particular, fi xed dates for presentation of the Throne Speech and budget, as well as dates for quarterly and annual reports, are set by law.

Under the BTAA, the provincial government focuses its budgeting and reporting on a summary accounts basis. The BTAA requirements include reporting on the advice of the Economic Forecast Council, presentation of the annual Estimates, Budget and Three-Year Fiscal Plan and Quarterly Reports in accordance with GAAP by 2004/05, publication of Quarterly Reports with revised forecasts, presentation of the Public Accounts, annual three-year service plans for each ministry and government organization, and an annual three-year government strategic plan.

Main Operating

Account

Special

Accounts

Consolidated

Revenue Fund

Financial

Statements

Crown

Corporations and

Agencies

(each publishing

its own

financial

statements)

Summary

Financial

Statements



Chart A2.2 summarizes the annual fi nancial process of the provincial government. This process consists of four main stages.

• Planning and Budget Preparation —Treasury Board reviews longer-term estimates of revenue, expense, capital and debt, and establishes a preliminary fi scal plan within the framework of the government’s overall strategic plan. Preliminary high-level targets are provided to ministries and received from Crown corporations. Ministries and Crown corporations prepare three-year service plans, including performance measures and targets, and operating and capital budgets, for review by Treasury Board and/or government Caucus committees. Treasury Board makes decisions on budget allocations for ministries and assesses Crown corporation net income benchmarks based on government revenue forecasts, spending and capital priorities, and debt targets within the context of the fi scal plan. As input to this process, a consultation paper is made public by September 15th of each year that invites public comment on issues that need to be addressed in the fi scal and service plans, and a committee of the legislature holds public hearings throughout the province.

• Implementation and Reporting — The government’s revenue, expense and capital plans for the next three fi scal years, as well as other information on the government’s fi nances, are presented to the Legislative Assembly by the

Chart A2.2 Financial Planning and Reporting CycleJA

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BUDGET PREPARATION

decisions on revenue, expense, Crown targets, capital, FTEs

Fiscal framework prepared and

preliminary targets established

Government Caucus Committee Review

Ministries and

Crown corporations

prepare 3-year service plans

including financial implications

Interim SupplyLegislative Assembly

approves

money/resources

CALENDAR YEAR CALENDAR YEAR CALENDAR YEAR CALENDAR YEAR

FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR

Based on Estimates and fiscal plan

FINANCIAL AND ECONOMIC REVIEW

Record of economic performance and annual government and

Crown corporation finances

PUBLIC ACCOUNTS PUBLISHED

Select Standing Committee reviews Public Accounts

Select Standing Committee reviews Crown Corporations

Annual service plan reports made public by

government, ministries and organizations

Three-year service plans made public by government, ministries and Crown organizations

Service plans are reported on

Legislative Assembly reviews Public Accounts

Detailed records of government and Crown

corporation finances (audited by Auditor General and

Crown corporation auditors)

Records are maintained of how

revenue is earned and the money

spent and forecasts updated

QUARTERLY REPORTS

ongoing reports of government and

Crown corporation finances

Money is spent on government

programs and services

ESTIMATES DEBATED

to authorize ministry operating and capital spending

Final Supply

Budget Consultation Process

BUDGET & THREE-YEAR FISCAL PLAN RELEASED

ESTIMATES RELEASEDGovernment tables in the Legislative

Assembly it's annual Estimates along with

a 3-Year Fiscal Plan and 3-year

ministry/Crown service plans

MINISTERIAL ACCOUNTABILITY REPORT PUBLISHED



Minister of Finance in a budget document called the Budget and Fiscal Plan. The fi nancial plan for the next fi scal year is included in the document called the Estimates, which describes the individual appropriations to be voted on by the Legislative Assembly. The service plans and a report on major capital projects (those whose government contribution exceeds $50 million) must also be tabled. Throughout the year, the authorized funding as specifi ed in the Estimates and ministry service plans is spent on programs and services. Crown corporations follow approved service plans under direction of their own Boards of Directors. Quarterly Reports, including full-year forecasts, are published by legislated dates to provide regular public updates on the government's fi nances.

• Evaluation — At the end of the fi scal year, the Public Accounts are prepared by the Comptroller General and examined by the Auditor General to ensure that the fi nancial statements fairly present the government's fi nancial position. The Public Accounts are augmented by the British Columbia Financial and Economic Review, which provides an overview of annual and historical fi nancial and economic results. In addition, annual service plan reports are made public that compare actual results with ministry and Crown corporation performance measure targets.

• Accountability — The Public Accounts are presented to the Legislative Assembly and they are reviewed by two committees of the Legislative Assembly (the Select Standing Committee on the Public Accounts and the Select Standing Committee on Crown corporations). The Ministerial Accountability Report is published detailing the individual and collective fi nancial performance of cabinet ministers, and the service and revenue results achieved by the Ministers of State and the Minister of Provincial Revenue. When the Public Accounts are tabled, ministries and most Crown corporations also release their service plan reports detailing results for the previous fi scal year, and a report on government's strategic plan is presented.

Capitalization

The government uses the "expense basis" of accounting for capital expenditures. Accordingly, capital expenditures are reported on the government's balance sheet (capitalized) and amortized (expensed) in the government’s annual budgetary expenditures over the useful life of the assets.

The provincial government also issues advances to the SUCH sector for investment in capital assets. These advances are capitalized in the summary accounts balance sheet as prepaid capital advances. Prepaid capital advances are amortized in similar fashion to capital assets.

Appendix Table A2.1 illustrates the effect of capitalization accounting policy on the government's surplus (defi cit) for 1998/99 to 2002/03. The table shows that excluding the effect of capitalization, the 2002/03 defi cit was $2,988 million compared to a $1,528 million defi cit in 2001/02. Additional information on the government’s capitalization accounting policy is provided in the 2002/03 Public Accounts.

The fi ve-year summary accounts balance sheet and the relationship between the surplus/defi cit and changes in debt is included in Appendix Table A2.5.



Unfunded Pension Liabilities

The province contributes to four defi ned benefi t pension plans for substantially all of its employees. These jointly trusteed pension plans were determined to be in a surplus position based on economic conditions and expectations at the time of their last actuarial valuation. The plans and the date of their last actuarial valuation are:

• Public Service Pension Plan, March 31, 2002;

• Municipal Pension Plan, December 31, 2000;

• Teachers’ Pension Plan, December 31, 2000; and

• College Pension Plan, August 31, 2000.

In the event that a plan is determined to be in a defi cit position by a subsequent actuarial valuation (performed every three years), the province is required to address the situation along with individual pension plan boards by adjusting joint contributions or through other measures.

Note 17 in the 2002/03 Public Accounts provides more information on pension plans.

In addition to pension benefi ts, each of the plans provide some group health and/or dental benefi ts to retired members. During 2002/03, all of the plans reviewed and curtailed some of these post-retirement group benefi ts due to rising costs.

Adjustments to the Accumulated Deficit

During 2002/03, a number of retroactive adjustments were made to the government's fi nancial statements to refl ect changes in accounting policy and to correct previously published information. Table A2.2 provides a brief summary of the changes that have been reviewed and approved by the Offi ce of the Auditor General.

One of the adjustments relates to certain tenures issued under the Small Business Forest Enterprise program where the provincial government is responsible for silviculture obligations. Previously, these costs were expensed when they occurred (a cash basis approach). In keeping with its move to accrual accounting (GAAP), the provincial government has estimated its

Table A2.1 Effects of Capitalization on the Summary Accounts

1998/99 1999/00 2000/01 2001/02 2002/03

($ millions)

Surplus (deficit) excluding effects of capitalization …………………(1,312) (676) 428 (1,528) (2,988)

Adjustments to include capitalization policy:

Add: Cost of capital asset investments during the year …………… 1,689 1,900 2,028 1,415 1,131

Less: Cost of disposals, amortization and valuation adjustments … (1,374) (1,074) (1,025) (1,172) (1,312)

Net adjustment …………………………………………………………… 315 826 1,003 243 (181)

Surplus (deficit) after capitalization …………………………………… (997) 150 1,431 (1,285) (3,169)



potential silviculture liability for these tenures and recorded the liability on its

balance sheet. The 2001/02 expense reduction refl ects the difference between

the accrued liability for the year and the actual cash expenditures that were

previously recorded.

In 2001/02, the provincial government reported a cash equalization payment

of $226 million that related to both 1999/00 and 2001/02. In 2002/03, the

provincial government accrued an additional $57 million for the federal

government's equalization obligation for these two years. Also in 2002/03 the

provincial government changed its accounting policy to record grants under

the program on an accrual basis rather than on a cash basis. As a result,

$125 million was allocated as revenue in 1999/00, an overall $68 million

reduction in revenue was recorded in 2001/02 and a $57 million reduction in

2002/03.

Canadian Blood Services is self-insured through a subsidiary, CBS Insurance

Company (CBSI), and records its investment in CBSI on an equity basis.

Previous consolidations of CBSI had been done on a line-by-line, fully

consolidated basis. The change in policy resulted in an overall $19 million

increase in the accumulated defi cit (based on the province's proportional share

of Canadian Blood Services).

Table A2.2 Summary of Changes in Accumulated Deficit

from the 2001/02 Public Accounts reported balance

Final

Change Results

($ millions)

Accumulated deficit on March 31, 2001 as reported in the 2001/02 Public Accounts …………… (3,509)

Opening balance adjustments reported in 2001/02 …………………………………………………… 32

Opening balance adjustments due to accounting policy changes in 2002/03:

Recognition of liability due to Small Business Forest Enterprise silviculture obligations …………… (129)

Change from cash to accrual accounting for federal equalization payments …………….………… 125

Change in consolidation method used by Canadian Blood Services to record its

investment in a subsidiary, CBS Insurance Company ………………..……………………………… (19) (23)


2001/02 deficit:

As reported in the 2001/02 Public Accounts …………………………...…………………………… (1,233)

Adjustments due to accounting policy changes in 2002/03:

Recognition of a reduction in Small Business Forest Enterprise silviculture liability ……………… 16

Change from cash to accrual accounting for federal equalization transfers ……………………… (68) (1,285)




Table A2.3 Five-Year Operating Results 1

1998/99 1999/00 2000/01 2001/02 2002/03

($ millions)

Consolidated revenue fund (CRF):

Revenue …………………………………………………………… 20,306 21,957 24,013 22,894 22,147Expenditure …………………………………………………………(20,581) (22,213) (22,460) (24,897) (25,196)

(275) (256) 1,553 (2,003) (3,049)Wind-up of Forest Renewal BC & Fisheries Renewal BC…… - - - 256 -

CRF Balance ……………………………………………………… (275) (256) 1,553 (1,747) (3,049)

Crown corporations and agencies:

Taxpayer-supported:

British Columbia Buildings Corporation …………………… 49 45 51 37 52British Columbia Ferry Corporation (BCFC) ………………… (114) (299) 11 (23) (29)BC Transportation Financing Authority ……………………… (114) 22 1 - (20)Forest Renewal BC (FRBC) …………………………………… (265) 1 (64) (179) -552513 British Columbia Ltd. (Skeena Cellulose Inc.) 2 …… - - - (69) (4) Other …………………………………………………………… 9 (44) 32 (6) 10

Accounting adjustments 3 …………………………………… (368) (131) (189) (225) (204) Debt assistance for BCFC and Skeena Cellulose Inc. ………………………………………………… - 1,080 - 220 -

Taxpayer-supported results before

contributions to the CRF ……………………………… (803) 674 (158) (245) (195)Contributions paid to CRF ………………………………… (14) (78) (69) (17) (34)Wind-up of Fisheries & Forest Renewal BC ……………… - - - (256) -

Taxpayer-supported net results …………………………… (817) 596 (227) (518) (229)

Commercial:

British Columbia Hydro & Power Authority - net income … 395 416 446 403 418 Reversal of RSA transfer impact on net income ………… - 129 103 (145) (66)British Columbia Hydro & Power Authority - operating …… 395 545 549 258 352Liquor Distribution Branch …………………………………… 616 617 642 637 654British Columbia Lottery Corporation ………………………… 456 532 562 606 671British Columbia Railway Company ………………………… 24 (582) (7) (107) (84)Insurance Corporation of British Columbia ………………… 74 96 139 (251) 45

552513 British Columbia Ltd. (Skeena Cellulose Inc.) 2 …… (26) (3) - - - Other …………………………………………………………… 3 4 4 - 14

Accounting adjustments 4 …………………………………… (99) (23) (301) (207) (60) Commercial results before

contributions to the CRF ……………………………… 1,443 1,186 1,588 936 1,592Contributions paid to CRF ………………………………… (1,348) (1,376) (1,431) (1,420) (1,483)

Commercial net results ……………………………………… 95 (190) 157 (484) 109

Total Crown corporations and agencies …………………… (722) 406 (70) (1,002) (120)

(Deficit) surplus before joint trusteeship ……………………… (997) 150 1,483 (2,749) (3,169)

Joint trusteeship …………………………………………………… - - (52) 1,464 -

(Deficit) surplus …………………………………………………… (997) 150 1,431 (1,285) (3,169)

1Based on 2002/03 Public Accounts information. For comparative purposes, figures for prior years have been restated for the presentation used in 2002/03, and to reflect accounting policy changes for certain CRF revenue and expenses. See Tables A2.6 and A2.7 for details

2Until 2000/01, 552513 British Columbia Ltd (Skeena Cellulose Inc) was classified as a commercial Crown corporation. Due to a significant deterioration in the outlook for world pulp prices, the company was reclassified as taxpayer-supported starting in 2001/02.

3Primarily reflects the amortization of the cost of highways transferred to the BC Transportation Financing Authority and one-time asset valuation

adjustments.4

Primarily reflects adjustments to account for differences between the fiscal year ends of the government and BC Rail and ICBC, and transfers of

BC Lottery revenue to charities and local governments.



Table A2.4 Summary of Changes from the 2002/03

Third Quarterly Report Updated Forecast

Final

Change Results

($ millions)

Budget deficit - 2002/03 Third Quarterly Report updated forecast ………………………… (3,800)

Consolidated revenue fund (CRF) changes:

Revenue changes:

- Personal income tax - lower personal income growth in 2002 ……………………………… (66)

- Corporation income tax - higher tax credits in 2001 ………………………………………… (32)

- Other taxes - higher collections from most sources except social service tax …………… 40

- Energy-related sources - higher prices ……………………………………………………… 153

- Forests - higher harvest volumes ……………………………………………………………… 111

- Medical Service Plan premiums………………………………………...……………………… (30)

- Equalization and CHST entitlements - lower population estimates and

accounting policy changes…………………………………………………………………… (168)- Other ……………………………………………………………………………………………… 46 54

Spending changes:

- Contingencies vote savings…………………………………………………………………… 113

- Ministry of Health Services savings…………………………………………………………… 26

- Other ministry savings…………………………………………………………………………. 58

- Lower debt interest……………………………………………………………………………… 19 216 270

Crown corporation changes:

Taxpayer-supported:

- British Columbia Buildings Corporation - accounting policy adjustment,revenue recognition …………..……………………….……………………………………… 42

- British Columbia Ferry Corporation - write-down of PacifiCat ferries to saleproceeds and transfer of proceeds to CRF ………………………………………………… (70)

- Other changes and adjustments ………………………………………….…………………… 42 14

Commercial:

- British Columbia Railway Company - impact of 2003 first quarter results onadjustment to match government's fiscal year-end …………………………………… (9)

- Insurance Corporation of British Columbia - impact of final audited results andadjustment to match government's fiscal year-end ……………………………………… 47

- Other changes and adjustments ……………………………………………………………… 9 47 61

Forecast allowance - not needed ………………………………………………………….. 300

Actual deficit - 2002/03 Public Accounts ………………………………………………………… (3,169)



Table A2.5 Five-Year Statement of Financial Position (unaudited)

1998/99 1999/00 2000/01 2001/02 2002/03

($ millions)

Financial AssetsCash and temporary investments ……………………………… 791 1,569 548 780 326Other financial assets …………………………………………… 3,577 4,155 4,525 4,412 4,093Investments in commercial Crown corporations

and agencies- Retained earnings of self-supported

Crown corporations ……………………………………. 2,960 2,820 3,001 2,520 2,629

- Loans for purchases of assetsrecoverable from agencies …………………………… 7,988 7,499 7,437 7,552 7,381

10,948 10,319 10,438 10,072 10,010Warehouse borrowing program assets ………………………… 658 1,320 1,312 1,067 -

15,974 17,363 16,823 16,331 14,429Liabilities

Current liabilities ………………………………………………… 3,502 4,091 3,945 4,177 4,576Unfunded pension liabilities ……………………………………… 2,444 2,053 1,477 6 4Debt

- Taxpayer-supported debt …………………………………… 23,204 25,181 24,998 27,177 29,060- Commercial Crown corporations and agencies…………… 9,057 9,297 8,882 8,741 7,497

Total provincial debt …………………………………………… 32,261 34,478 33,880 35,918 36,557Less : guarantees and non-guaranteed debt ………………… (707) (934) (597) (464) (416)

31,554 33,544 33,283 35,454 36,141

37,500 39,688 38,705 39,637 40,721

Net Liabilities ……………………………………………………… (21,526) (22,325) (21,882) (23,306) (26,292)

Capital and Other AssetsPrepaid capital advances ………………………………………… 6,138 6,517 6,905 7,033 7,108Tangible capital assets …………………………………………… 10,029 10,476 11,091 11,206 10,950Other assets ……………………………………………………… 278 401 386 282 280

16,445 17,394 18,382 18,521 18,338

Accumulated surplus (deficit) …………………………………. (5,081) (4,931) (3,500) (4,785) (7,954)

Change in Summary Accounts Financial Position

1998/99 1999/00 2000/01 2001/02 2002/03

($ millions)

Change in accumulated (surplus)/deficit: 997 (150) (1,431) 1,285 3,169

Working capital changes:Increase (reduction) in cash and temporary investments …… (507) 778 (1,021) 232 (454)Reduction in unfunded pension liability ………………………… 252 391 576 1,471 2Other working capital changes ………………………………… 407 112 501 (449) (720)

152 1,281 56 1,254 (1,172)Capital asset and investment changes:

Increase in taxpayer-supported capital investments ………… 1,689 1,900 2,028 1,415 1,131Less: amortization and other accounting changes ………… (1,374) (1,074) (1,025) (1,172) (1,312)

315 826 1,003 243 (181)

Increase in total investment in commercial Crowncorporations ……………………………………………………… 740 953 771 410 984Less: loan repayments and other accounting changes …… (241) (1,582) (652) (776) (1,046)

499 (629) 119 (366) (62)

Increase (decrease) in warehouse borrowing investments … 446 662 (8) (245) (1,067)

1,260 859 1,114 (368) (1,310)

Increase (decrease) in guarantees andnon-guaranteed debt ………………………………………… (503) 227 (337) (133) (48)

Increase (decrease) in total provincial debt …………………. 1,906 2,217 (598) 2,038 639



Table A2.6a Five-Year Revenue by Source


1998/99 1999/2000 2000/01 2001/02 2002/03

($ millions)

Taxation Revenue

Personal income…...................................................................... 5,423 5,825 5,963 5,375 4,154

Corporation income..................................................................... 1,098 939 1,054 1,522 613

Social service.............................................................................. 3,209 3,338 3,617 3,535 3,770

Fuel............................................................................................. 654 470 443 398 393

Tobacco...................................................................................... 505 498 460 499 606

Property - residential (school purpose) 2..................................... 511 529 538 556 562

Property - business (school purpose) ........................................ 764 758 770 781 823

Property - rural area.................................................................... 61 63 63 64 72

Property transfer......................................................................... 223 245 262 303 407

Corporation capital...................................................................... 455 460 459 395 198

Insurance premium..................................................................... 195 199 196 203 223

Hotel room ................................................................................ 79 86 93 93 98

Horse racing................................................................................ 4 3 - - -

Less commissions on collection of public funds ........................ (24) (24) (23) (36) (32)

Less allowance for doubtful accounts..............…………………… (23) (25) (14) (36) (41)

Total taxation revenue.............................................................. 13,134 13,364 13,881 13,652 11,846

Natural Resouce Revenue

Natural gas and petroleum

Natural gas royalties............................................................... 193 328 1,249 836 1,056

Permits and fees..................................................................... 106 248 462 360 330

Petroleum royalties................................................................. 62 94 136 103 118

361 670 1,847 1,299 1,504

Columbia River Treaty……………………………………………… 16 100 632 360 100

Minerals...................................................................................... 44 47 53 53 63

421 817 2,532 1,712 1,667

Forests

Timber sales .......................................................................... 815 1,041 821 830 996

Small Business Forest Enterprise Program............................ 209 269 257 186 292

Logging tax............................................................................. 14 24 60 28 21

Other forests revenue ............................................................ 55 58 15 65 14

1,093 1,392 1,153 1,109 1,323

Water resources.......................................................................... 306 297 294 284 257

Wildlife Act - fees and licences................................................... 15 15 15 15 14

Less commissions on collection of public funds ........................ (1) (1) (1) (1) (1)

Less allowance for doubtful accounts..............…………………… (5) (3) (18) (11) (5)

Total natural resource revenue................................................ 1,829 2,517 3,975 3,108 3,255

Other Revenue

Fees and Licences

Medical Services Plan premiums........................................... 876 868 895 955 1,358

Motor vehicle licences and permits ....................................... 329 336 342 346 355

Ministry of Attorney General and Land Registries fees ......... 106 102 101 107 110

Other fees and licences ......................................................... 258 261 229 232 226

Less commissions on collection of public funds .................... (51) (14) (7) (7) (9)

Less allowance for doubtful accounts..............………………… (34) (5) (17) (44) (90)

1,484 1,548 1,543 1,589 1,950

Investment Earnings and Miscellaneous

Investment earnings ............................................................. 51 60 111 64 18

Fines and penalties................................................................ 112 108 99 99 77

Other miscellaneous............................................................... 125 127 126 160 168

Asset dispositions ………………………………………………… 63 52 - 42 -

Less commissions on collection of public funds .................... (4) (3) - (4) (4)

Less allowance for doubtful accounts..............………………… - (4) (19) (40) (3)

347 340 317 321 256

Total other revenue...............................................………......... 1,831 1,888 1,860 1,910 2,206



Table A2.6a Five-Year Revenue by Source


1998/99 1999/2000 2000/01 2001/02 2002/03

($ millions)

Contributions from Government Enterprises

Liquor Distribution Branch .......................................................... 616 617 642 637 654

British Columbia Hydro and Power Authority ............................. 323 343 372 332 338

British Columbia Lottery Corporation 3........................................ 369 416 414 449 489

Other contributions...................................................................... 54 78 72 19 36

Total contributions from government enterprises................ 1,362 1,454 1,500 1,437 1,517

Contributions from the Federal Government

Canada health and social transfer.............................................. 1,968 2,438 2,619 2,445 2,606

Equalization 4...........................……………………...……………… - 125 - 158 543

Education (public schools).......................................................... 76 81 74 85 80

Other payments ......................................................................... 106 90 104 99 94

Total contributions from the federal government.................. 2,150 2,734 2,797 2,787 3,323

Total Revenue................................................................................ 20,306 21,957 24,013 22,894 22,147

1 For comparative purposes, figures for prior years have been restated to be consistent with the presentation used in 2002/03. Figures exclude dedicated

revenue collected on behalf of, and transferred to, British Columbia Transit, British Columbia Ferry Corporation, BC Transportation Financing Authority,

Greater Vancouver Transportation Authority (TransLink ), Forest Renewal BC, BC Oil and Gas Commission, and Tourism British Columbia. These

revenues are included as part of the operations of Crown corporations and agencies, with the exception of Translink and certain other public bodies that

are not part of the provincial government.2 Revenue is shown net of home owner grants (basic and supplementary). 3 The British Columbia Lottery Corporation remitted additional funds to government which was distributed to charitable organizations and local governments. 4 Revenue has been restated for prior years reflecting a change in accounting policy for equalization entitlements from cash basis to accrual. This had

the effect of increasing 1999/00 revenue by $125 million, and reducing 2001/02 and 2002/03 revenue by $68 million and $57 million, respectively.

Table A2.6b Five-Year Dedicated Revenue Collected on Behalf of, and Transferred to,

Crown Corporations and Agencies, and Other Entities

1998/99 1999/2000 2000/01 2001/02 2002/03

($ millions)

Dedicated Revenue:

British Columbia Transit 1………………………………...………… 94 8 7 8 8

BC Transportation Financing Authority (BCTFA) 2……………… 124 176 202 195 222

Forest Renewal BC 3………………………………………………… 177 302 187 144 -

British Columbia Ferry Corporation 4……………………………… - 65 73 71 75

Greater Vancouver Transportation Authority (TransLink ) 5……… - 182 173 201 250

Tourism British Columbia 6………………………………………… 20 22 24 24 25

Oil and Gas Commission 7………………………………………… 6 13 18 17 20

Other 8………………………………………………………………… 149 151 158 178 190 Total Dedicated Revenue.............................................................. 570 919 842 838 790

1 The 1998/99 figure includes motor fuel tax collected in the Vancouver and Victoria regional transit service areas. Effective April 1, 1999,

figures include motor fuel tax collected only in the Victoria regional transit area (2.5 cents/litre on clear gasoline and motive fuel) as a result of

the creation of TransLink .2 Includes motor fuel tax and a sales tax on short-term rentals of passenger vehicles. Figures are based on a transfer of 6.75 cents/litre on

clear gasoline and motive fuel effective March 1, 2003, up from 3.25 cents/litre on clear gasoline and motive fuel effective April 1, 2000.

The initial rate of 1 cent/litre (effective May 1, 1994) was increased to 2 cents/litre on July 1, 1997 and 3 cents/litre on June 1, 1999.3 Includes incremental stumpage and royalty revenue resulting from changes to rates introduced under the provincial government's

Forest Renewal Plan on and after May 1, 1994.4 Includes 1 cent/litre of motor fuel tax for the period April 1, 1999 to September 30, 1999 and 1.25 cents/litre effective October 1, 1999.5 Effective April 1, 1999, includes 8 cents/litre on clear gasoline and motive fuel (4 cents/litre of which was previously collected on behalf of

BC Transit) and social services tax on parking in the Vancouver transit area. Effective April 1, 2002, the tax collected increased to 11 cents/litre

on clear gasoline and motive fuels, up from 9 cents/litre effective April 1, 2001.6 Includes a 1.65-per-cent share of the revenue raised from the 8-per-cent provincial hotel room tax.7 Includes fees collected under the Petroleum and Natural Gas Act and the Pipeline Act, and a levy assessed under the Oil and Gas Commission Levy

Regulation.8 Primarily reflects transfers of property tax revenue collected on behalf of local governments.



Table A2.7 Five-Year Revenue by Source - Supplementary Information


1998/99 1999/2000 2000/01 2001/02 2002/03

(per cent)

Per Cent of GDP: 2

Taxation........................................................................... 11.4 11.1 10.7 10.4 8.8

Natural resource.............................................................. 1.6 2.1 3.1 2.4 2.4

Other................................................................................ 1.6 1.6 1.4 1.5 1.6

Contributions from government enterprises.................... 1.2 1.2 1.2 1.1 1.1

Contributions from the federal government .................... 1.9 2.3 2.2 2.1 2.5

Total Revenue..................................................... 17.6 18.2 18.6 17.5 16.5

Growth Rates: (per cent)

Taxation........................................................................... 0.2 1.8 3.9 -1.6 -13.2

Natural resource.............................................................. -16.8 37.6 57.9 -21.8 4.7

Other................................................................................ 1.8 3.1 -1.5 2.7 15.5

Contributions from government enterprises.................... 6.4 6.8 3.2 -4.2 5.6

Contributions from the federal government .................... 17.0 27.2 2.3 -0.4 19.2

Total Revenue..................................................... 0.4 8.1 9.4 -4.7 -3.3

Per Capita Revenue: 3 (dollars)

Taxation........................................................................... 3,286 3,318 3,419 3,328 2,860

Natural resource.............................................................. 458 625 979 758 786

Other................................................................................ 458 469 458 466 533

Contributions from government enterprises.................... 341 361 369 350 366

Contributions from the federal government .................... 538 679 689 679 803

Total Revenue..................................................... 5,080 5,451 5,914 5,582 5,348

Real Per Capita Revenue (2002 dollars) 4 5,445 5,779 6,155 5,713 5,348

- growth rate (per cent)................................................ -0.8 6.1 6.5 -7.2 -6.4

1Revenue has been restated to reflect the government's accounting policy at March 31, 2003. Figures exclude dedicated revenue

collected on behalf of, and transferred to, Crown corporations and agencies, the Greater Vancouver Transportation Authority

(Translink ) and other public bodies.2

Revenue as a per cent of GDP is calculated using GDP for the calendar year ending in the fiscal year (e.g. 2002/03 revenue

divided by GDP for the 2002 calendar year). Totals may not add due to rounding.3

Per capita revenue is calculated using July 1 population (e.g. 2002/03 revenue divided by population on July 1, 2002). 4

Revenue is converted to real (inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar

year (e.g. 2002 CPI for 2002/03 revenue). Totals may not add due to rounding.



Table A2.8 Five-Year Expense by Function 1


1998/99 1999/2000 2000/01 2001/02 2002/03

($ millions)

Health

Hospital care……………………………………………… 4,546 4,836 5,278 5,998 6,305

Medical care……………………………………………… 2,420 2,665 2,847 3,166 3,308

Preventive care…………………………………………… 207 248 337 384 419

Other health………………………………………………… 306 268 283 298 325

Total……………………………………………………… 7,479 8,017 8,745 9,846 10,357

Social services………………………………………………… 3,113 3,093 3,208 3,381 3,090

Education

Elementary and secondary……………………………… 4,161 4,262 4,349 4,868 4,890

Post-secondary…………………………………………… 1,451 1,497 1,806 1,797 1,828

Other education…………………………………………… 213 216 202 189 159

Total……………………………………………………… 5,825 5,975 6,357 6,854 6,877

Protection of persons and property

Law enforcement……………………………………..…… 328 347 327 376 373

Police protection…………………………………………. 157 161 175 197 229

Corrections………………………………………………… 207 224 242 267 256

Other protection and regulation………………………… 297 296 275 263 243

Total……………………………………………………… 989 1,028 1,019 1,103 1,101

Transportation

Road and air……………………………………………… 472 469 447 494 490

Ferries……………………………………………………… 24 1,080 2 - - -

Public transit……………………………………………… 294 148 3 164 207 260

Total……………………………………………………… 790 1,697 611 701 750

Natural resources and economic development

Forests (includes firefighting)…………………………… 571 4 491 4 592 4 794 4 902

Minerals and mines……………………………………… 31 43 58 113 47

Environment and agriculture……………………………… 213 226 238 306 322

Fish and game……………………………………………. 21 21 28 18 4

Trade and industry……………………………………….. 112 182 2 110 93 82

Total……………………………………………………… 948 963 1,026 1,324 1,357

Other expense

Local government………………………………………… 200 127 122 169 178

Housing support…………………………………………… 91 93 104 134 151

Recreation and culture…………………………………… 81 139 2 115 89 73

Restructuring exit costs…………………………………… - - - 161 5 188 5

Total……………………………………………………… 372 359 341 553 590

General government

Legislature………………………………………………… 35 34 34 39 37

Administration……………………………………………… 192 212 230 335 326

Total……………………………………………………… 227 246 264 374 363

Debt servicing………………………………………………… 838 835 889 761 711

Total Expense…………………………………………… 20,581 22,213 22,460 24,897 25,196

1Expense by function has been restated to conform more closely to the presentation used by Statistics Canada. Figures are based on

2002/03 Public Accounts information. For comparative purposes, figures for previous years have been restated to be consistent with the

presentation used in 2002/03.2

1999/00 includes one-time expenses of $1,183 million to record the forgiveness of $1,080 million of debt owed by the British Columbia

Ferry Corporation to the government, and write-downs of provincial investments in the Vancouver Trade and Convention Centre (trade

and industry - $70 million) and the Kemess mine (recreation and culture - $33 million).3

Public transit expenses are lower in 1999/00 due to the transfer of transit responsibilities for the Lower Mainland from British Columbia Transit to

the Greater Vancouver Transportation Authority (TransLink ) at the end of 1998/99. Funding for TransLink is provided by increased provincial

transfers of revenue from fuel and sales taxes, increased access to the local property tax base, and other own-source fees and charges.4

Expense for prior years was decreased due to a change in recognition of silviculture liabilities arising under the Small Business

Forest Enterprise Program. Silviculture costs were previously expensed as incurred but are now accrued when the liability

occurs. Expense was reduced by $16 million-2001/02, $4.5 million-2000/01, $2.2 million-1999/00, and $5.9 million-1998/99.5

Restructuring exit costs have no future value to government and are shown separately from other categories of operating expenses.



Table A2.9 Five-Year Expense by Function - Supplementary Information


1998/99 1999/2000 2000/01 2001/02 2002/03

(per cent)

Per Cent of GDP:

Health care................................................................................. 6.5 6.6 6.8 7.5 7.7

Social services........................................................................... 2.7 2.6 2.5 2.6 2.3

Education................................................................................... 5.0 5.0 4.9 5.2 5.1

Protection of persons and property............................................ 0.9 0.9 0.8 0.8 0.8

Transportation............................................................................ 0.7 1.4 0.5 0.5 0.6

Natural resources and economic development.......................... 0.8 0.8 0.8 1.0 1.0

Other expense........................................................................... 0.3 0.2 0.2 0.5 0.5

General government.................................................................. 0.2 0.2 0.2 0.3 0.3

Debt servicing............................................................................ 0.7 0.7 0.7 0.6 0.5

Total Expense.............................................................. 17.8 18.4 17.4 19.0 18.8


Health care................................................................................. 3.5 7.2 9.1 12.6 5.2

Social services........................................................................... -0.5 -0.6 3.7 5.4 -8.6

Education................................................................................... 1.0 2.6 6.4 7.8 0.3

Protection of persons and property............................................ 10.3 3.9 -0.9 8.2 -0.2

Transportation 2......................................................................... 2.6 114.8 -64.0 14.7 7.0

Natural resources and economic development 2....................... 14.8 1.6 6.5 29.0 2.5

Other expense 2......................................................................... -21.4 -3.5 -5.0 62.2 6.7

General government.................................................................. 6.6 8.4 7.3 41.7 -2.9

Debt servicing............................................................................ 0.5 -0.4 6.5 -14.4 -6.6

Total Expense 2............................................................ 2.2 7.9 1.1 10.9 1.2

Per Capita Expense: (dollars)

Health care................................................................................. 1,871 1,990 2,154 2,401 2,501

Social services........................................................................... 779 768 790 824 746

Education................................................................................... 1,457 1,483 1,566 1,671 1,661

Protection of persons and property............................................ 247 255 251 269 266

Transportation............................................................................ 198 421 150 171 181

Natural resources and economic development.......................... 237 239 253 323 328

Other expense........................................................................... 93 90 84 134 141

General government.................................................................. 57 61 65 91 88

Debt servicing............................................................................ 210 207 219 186 172

Total Expense.............................................................. 5,149 5,514 5,532 6,070 6,084

Real Per Capita Expense (2002 dollars) 5,519 5,846 5,756 6,212 6,084

- growth rate (per cent) 2........................................................ 1.0 5.9 -1.5 7.9 -2.1

1 Expense has been restated to reflect the government's accounting policy at March 31, 2003.2 Excluding one-time expenses in 1999/00 of $1,183 million, 1999/00 growth rates would be -21.9% for transportation,

-4.3% for natural resources and economic development, -12.4% for other, 2.1% for total spending, and 0.3% for real per

capita; 2000/01 growth rates would be -1.0% for transportation, 15.2% for natural resources and economic development,

4.6% for other, 6.8% for total spending, and 3.9% for real per capita.

Note: Per capita expense is calculated using July 1 population (e.g. 2002/03 expense divided by

population on July 1, 2002). Similarly, expense as a per cent of GDP is calculated using GDP for the calendar year ending

in the fiscal year (e.g. 2002/03 expense divided by GDP for the 2002 calendar year). Expense is converted to real

(inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar year (e.g. 2002 CPI for

2002/03 expense).



Table A2.10a Government Restructuring Exit Expense 1

2001/02 2002/03

$ millions

Consolidated Revenue Fund:

Government Restructuring (All Ministries) Vote………………………………… 81 185

Ministry budgets…………………………………………………………………… 23 3

Contingencies Vote………………………………………………………………… 57 161 - 188 2

Taxpayer-supported Crown Corporations:

BC Buildings Corporation…………………………………………………………… 5 51

BC Health Research Foundation………………………………………………… - 4

BC Pavilion Corporation…………………………………………………………… - 1

Forest Renewal BC………………………………………………………………… 37 -

Legal Services Society……………………………………………………………… 6 2

Okanagan Valley Tree Fruit Authority…………………………………………… - 10

Other………………………………………………………………………………… 15 -

Less : ministry payments to taxpayer-supported Crown corporations………… - 63 (87) (19) 3

Subtotal taxpayer-supported………………………………………………………… 224 169

Commercial Crown Corporations:

BC Hydro…………………………………………………………………………… - 37

BC Liquor Distribution Branch……………………………………………………… - 28

BC Rail……………………………………………………………………………… 165 -

Insurance Corporation of BC……………………………………………………… 40 205 15 80 4

Total restructuring exit costs………………………………………………………… 429 249

1 Includes one-time expenditures relating to staffing, building occupancy and other restructuring activities that

have no future value to government.2 As reported in Table A2.10b.3 As reported in the 2002/03 Public Accounts summary statements.4 Included as part of changes to government investments in commercial Crown corporations.



Table A2.10b Consolidated Revenue Fund

Government Restructuring Expense, 2002/03

Restructuring Exit Expense 1 Non-Exit Restructuring Expense 2

Work- Accom- Other Total Work- Accom- Other Total Total

force modation Restruc- force modation Restruc-

Adjust- Restruc- turing Adjust- Restruc- turing

ment turing ment turing

($ millions)

Government Restructuring

(All Ministries) Vote:

Legislation…………………………… - - - - - - - - -

Officers of the Legislature………… 0.5 - - 0.5 - 0.1 - 0.1 0.6

Office of the Premier……………… 0.3 - - 0.3 - - - - 0.3

Advanced Education……………… 0.8 0.7 - 1.5 0.2 - - 0.2 1.7

Agriculture, Food and Fisheries…… 0.8 1.1 - 1.9 - - - - 1.9

Attorney General…………………… 4.3 - - 4.3 0.2 1.4 0.3 1.9 6.2

Children and Family

Development…………………… 7.8 0.8 4.1 12.7 0.1 0.6 0.6 1.3 14.0

Community, Aboriginal and

Women's Services…………… 1.7 - 2.5 4.2 - 0.1 1.9 2.0 6.2

Competition, Science

and Enterprise………………… 0.6 0.1 - 0.7 - 0.1 - 0.1 0.8

Education…………………………… 0.7 - - 0.7 - - - - 0.7

Energy and Mines…………………… 0.5 - - 0.5 0.1 0.1 - 0.2 0.7

Finance……………………………… 0.4 - - 0.4 0.1 0.3 0.1 0.5 0.9

Forests……………………………… 12.1 5.1 0.7 17.9 0.1 0.3 0.6 1.0 18.9

Health Planning……………………… 0.3 - - 0.3 0.1 - - 0.1 0.4

Health Services……………………… - - - - - - - - -

Human Resources………………… 3.5 0.3 0.1 3.9 0.2 0.5 - 0.7 4.6

Management Services……………… 2.6 - - 2.6 - 0.4 5.1 5.5 8.1

Provincial Revenue………………… 0.7 - - 0.7 - - - - 0.7

Public Safety and

Solicitor General……………… 3.9 46.3 - 50.2 0.1 5.6 0.1 5.8 56.0

Skills Development and Labour…… 0.7 - - 0.7 0.1 0.3 0.1 0.5 1.2

Sustainable Resource

Management…………………… 3.8 1.7 - 5.5 - 0.1 0.3 0.4 5.9

Transportation……………………… 5.7 11.5 0.1 17.3 1.8 1.2 0.2 3.2 20.5

Water, Land and Air Protection…… 2.3 14.7 1.9 18.9 - 0.3 - 0.3 19.2

Other Appropriations……………… - 0.4 - 0.4 - - - - 0.4

Cross-Government 3 ……………… 29.9 8.8 - 38.7 1.3 0.9 1.1 3.3 42.0

Total vote…………………………… 83.9 91.5 9.4 184.8 4.4 12.3 10.4 27.1 211.9

Ministry Budgets:

Health Services……………………… 2.2 0.2 - 2.4 0.4 0.7 1.3 2.4 4.8

Sustainable Resource

Management…………………… - - 1.1 1.1 - - - - 1.1

Water, Land and Air Protection…… - - - - 0.8 0.2 0.1 1.1 1.1

Total from ministry budgets…… 2.2 0.2 1.1 3.5 1.2 0.9 1.4 3.5 7.0

Total………………………………… 86.1 91.7 10.5 188.3 5.6 13.2 11.8 30.6 218.9

1 Restructuring exit costs represent no future value to government.2 Non-exit restructuring costs result from the restructuring initiative but do have a future value to government.3 Cross-Government expense includes government-wide charges for enhanced pension eligibility, involuntary severance,

severance for long-term disability employees and other transition costs not attributable to a specific ministry.



Table A2.11 British Columbia Buildings Corporation

Five-Year Income Statement for the Years Ended March 31

1999 2000 2001 2002 2003

($ millions)

Revenues:Rentals ………………………………………………………… 399.0 399.3 403.6 412.7 396.6Other income ………………………………………………… 37.3 48.3 48.2 46.1 64.6Gains on sale of properties ………………………………… 9.9 15.9 10.4 6.6 10.5

446.2 463.5 462.2 465.4 471.7 Expenses:

Lease costs and client projects ……………………………… 165.4 169.0 174.8 172.5 193.7Operations and maintenance ……………………………… 139.3 149.7 156.7 168.7 155.7Amortization …………………………………………………… 40.6 39.8 41.6 41.6 38.0Interest expense ……………………………………………… 51.5 60.0 38.2 39.9 36.9

396.8 418.5 411.3 422.7 424.3

Net income before restructuring items ………………………… 49.4 45.0 50.9 42.7 47.4 Restructuring costs …………………………………………… - - - (5.5) (8.4)Early lease termination recoveries ………………………… - - - - 13.1

Net income ……………………………………………………… 49.4 45.0 50.9 37.2 52.1

Source: British Columbia Buildings Corporation.

Table A2.12 British Columbia Ferry Corporation


1999 2000 2001 2002 2003

($ millions)

RevenuesTolls …………………………………………………………… 296.5 292.4 292.8 305.7 315.6Catering and other income ………………………………… 87.6 85.9 91.1 95.8 100.2Provincial grant/dedicated revenue 1 ……………………… 24.0 64.9 72.5 71.7 74.2

408.1 443.2 456.4 473.2 490.0 Expenses:

Salaries, wages and benefits ……………………………… 235.2 227.2 227.1 241.6 248.1Other operating costs ………………………………………… 146.5 161.9 168.9 166.3 172.0Net financing expense ……………………………………… 42.4 53.1 (0.3) 1.8 1.4Amortization …………………………………………………… 50.3 60.2 50.0 46.1 44.1

474.4 502.4 445.7 455.8 465.6

Net income (loss) before unusual items ……………………… (66.3) (59.2) 10.7 17.4 24.4 Provision for write-down of PacifiCat ferries ……………… (48.0) (240.0) - (40.0) (53.1)

Net income (loss) ………………………………………………… (114.3) (299.2) 10.7 2 (22.6) (28.7)

1 Differs from amounts reported in Table A2.6b (dedicated revenue) due to minor year-end accounting adjustments. 2 Excludes the effect of the government's foregiveness of $1,080 million of debt. This is recorded on the corporation's balance

sheet and is accounted for in the government's summary accounts as an adjustment to taxpayer-supported Crowncorporations and agencies.

Source: British Columbia Ferry Corporation.



Table A2.13 BC Transportation Financing Authority

Five-Year Consolidated Statement of Income for the Years Ended March 31

1999 2000 2001 2002 2003

($ millions)

RevenueDedicated revenue 1 ………………………………………… 126.3 177.2 199.5 196.7 223.2 Provincial grants ……………………………………………… - - - 42.2 -Contractors' fees and other ………………………………… - 33.5 87.3 38.2 8.4Capital contributions (amortization) 2 ……………………… - 189.7 189.7 188.7 187.5

126.3 400.4 476.5 465.8 419.1 Expenditures

Operations and administration …………..………………… 49.7 46.4 41.0 43.7 6.2Construction wages and benefits …………………………… - 26.6 80.6 30.2 0.7Amortization 2 ………………………………………………… 32.1 231.4 247.9 263.4 286.3 Interest ………………………………………………………… 68.1 73.8 106.3 118.6 126.1

149.9 378.2 475.8 455.9 419.3

Operating results before extraordinary items ………………… (23.6) 22.2 0.7 9.9 (0.2)

Extraordinary items ……………………………………………… (90.7) 3 - - (10.0) 4 (19.6) 5

Net results for the year ………………………………………… (114.3) 22.2 0.7 (0.1) (19.8)

1Differs from amounts reported in Table A2.6b (dedicated revenue) due to minor year-end accounting adjustments.

2Effective March 31, 1999, the provincial government transferred highway infrastructure assets to the Authority. The value of the highways is recorded

3The net book value of highways in the Lower Mainland that were transferred to the Greater Vancouver Transportation Authority.

4The net book value of highways transferred to municipalities as a result of incorporations and completion of new arterial routes.

5The net book value of highways transferred to municipalites ($2.4 million), write-down of highway development costs ($10.5 million) and the write-down of assets held for resale ($6.7 million).

Source: BC Transportation Financing Authority.

on the Authority's balance sheet as a deferred capital contribution, which is amortized as income to offset the amortization expense of the highways.

Table A2.14 British Columbia Hydro and Power Authority


1999 2000 2001 2002 2003

($ millions)

Revenue:Domestic ……………………………………………………… 2,277.9 2,327.5 2,431.0 2,450.0 2,475.0Electricity trade ……………………………………………… 739.0 1,129.1 5,458.0 3,861.0 1,932.0

3,016.9 3,456.6 7,889.0 6,311.0 4,407.0Expenses:

Energy costs ………………………………………………… 1,075.2 1,354.9 5,162.0 4,407.0 2,426.0Operating expenses ………………………………………… 592.3 612.4 929.0 716.0 718.0Depreciation …………………………………………………… 338.8 365.0 380.0 386.0 417.0Finance charges ……………………………………………… 615.2 578.8 559.0 544.0 457.0

2,621.5 2,911.1 7,030.0 6,053.0 4,018.0

Operating results ………………………………………………… 395.4 545.5 859.0 258.0 389.0 Restructuring costs …………………………………………… - - - - (37.0)Customer profit sharing ……………………………………… - - (310.0) - -Transfer (to) from RSA 1……………………………………… - (129.3) (103.0) 145.0 66.0

Net income ……………………………………………………… 395.4 416.2 446.0 403.0 418.0

1Effective March 31, 1999, the Authority modified its accounting and reporting of transfers (to) from the rate stabilization account (RSA). RSA

Source: British Columbia Hydro and Power Authority.

transfers are now shown as adjustments to net income rather than to retained earnings as previously reported.



Table A2.15 Liquor Distribution Branch


1999 2000 2001 2002 2003

($ millions)

Provincial liquor sales …………………………………………… 1,640.8 1,663.3 1,719.2 1,792.9 1,885.3Less: Cost of sales 1…………………………………………… 850.6 864.8 891.6 929.6 981.0

Gross margin …………………………………………………… 790.2 798.5 827.6 863.3 904.3 Operating expenses …………………………………………… (178.2) (188.4) (197.9) (231.9) (254.9)Other income …………………………………………………… 3.9 7.3 12.7 5.3 4.8

Net income ……………………………………………………… 615.9 617.4 642.4 636.7 654.2

1Includes discounts and commissions.

Source: Liquor Distribution Branch.

Table A2.16 British Columbia Lottery Corporation


1999 2000 2001 2002 2003

($ millions)

Gaming revenue ………………………………………………… 1,261.5 1,401.5 1,483.0 1,607.4 1,792.4Less: Prizes and direct costs ………………………………… 699.1 745.9 796.1 863.5 987.0

Gross margin …………………………………………………… 562.4 655.6 686.9 743.9 805.4 Operating expenses (net) ……………………………………… (106.4) (123.6) (124.9) (137.8) (134.5)

Net income ……………………………………………………… 456.0 532.0 562.0 606.1 670.9

Allocation of net incomeGovernment of Canada ……….…………………..………… 7.0 7.2 7.4 7.6 7.8Funding for provincial gaming programs …………………… 5.0 1.9 3.7 4.1 3.2Transfers to charities/local governments …………………… 74.6 106.9 137.2 145.6 171.1Contribution to provincial revenue ………………………… 369.4 416.0 413.7 448.8 488.8

456.0 532.0 562.0 606.1 670.9

Source: British Columbia Lottery Corporation.



Table A2.17 British Columbia Railway Company

Five-Year Income Statement for the Years Ended December 31 1

1998 1999 2000 2001 2002

($ millions)

Revenue ………………………………………………………… 338.3 341.1 333.5 301.8 313.2Expenses ………………………………………………………… 284.5 271.3 293.1 266.6 241.9

Operating income ……………………………………………… 53.8 69.8 40.4 35.2 71.3 Non-operating expenses …………………………………… (21.8) (22.6) (28.7) (29.7) (15.3)

Income from continuing operations before special charges … 32.0 47.2 11.7 5.5 56.0 Special charges ……………………………………………… - (605.8) 2 (8.0) 3 (79.8) 4 -

Income (loss) from continuing operations …………………… 32.0 (558.6) 3.7 (74.3) 56.0 Results of discontinued operations ……….………………… (7.9) (23.5) (10.4) (32.6) (140.2)

Net income (loss) ………………………………………………… 24.1 (582.1) (6.7) (106.9) (84.2)

1Prior years are restated to be consistent with the current presentation.

2Asset impairment charge on northern British Columbia rail assets.

3Provision to reflect anticipated future costs of environmental remediation.

4Restructuring costs.

Source: British Columbia Railway Company.

Table A2.18 Insurance Corporation of British Columbia

Five-Year Income Statement for the Years Ended December 31

1998 1999 2000 2001 2002

($ millions)

Revenue:Net premiums ………………………………………………… 2,368.9 2,382.4 2,387.0 2,447.1 2,628.5Investment income …………………………………………… 412.2 449.2 625.7 454.0 327.3Net provincial fine and licence collections 1………………… 41.0 - - - -

2,822.1 2,831.6 3,012.7 2,901.1 2,955.8Claims and expenses:

Claims incurred …………………………………………… 2,134.6 2,080.3 2,006.2 2,126.3 2,193.5 Prior years' claims adjustments ………………………… (219.5) (238.2) (266.3) 2.2 (24.8)Net claims incurred …………………………………………… 1,915.1 1,842.1 1,739.9 2,128.5 2,168.7Claims operations expense ………………………………… 287.6 334.3 333.0 316.6 268.5Operating costs - insurance ………………………………… 417.0 466.8 479.2 472.6 374.7Operating costs - non-insurance …………………………… 81.9 92.7 103.4 94.4 83.7

2,701.6 2,735.9 2,655.5 3,012.1 2,895.6

Income before unusual items ………………………………… 120.5 95.7 357.2 (111.0) 60.2 Unusual items …………………………………………………… (47.0) 2 - (218.5) 2 (139.5) 3 (15.2) 4

Net income (loss) ………………………………………………… 73.5 95.7 138.7 (250.5) 45.0

1Commencing in 1997, the corporation assumed responsibility for the collection of licence fees and fines revenues as part of a merger withthe Motor Vehicle Branch of the Ministry of Transportation and Highways.

2Road Safety Dividend.

3Includes restructuring costs ($39.5 million) and a provision for a reduction in investment value ($100 million).

4Restructuring costs.

Source: Insurance Corporation of British Columbia.



Table A2.19 Five-Year Provincial Debt Summary 1

Budget Actual

1998/99 1999/2000 2000/01 2001/02 2002/03 2002/03

($ millions)


Provincial government direct operating…………………… 12,217 13,859 2 12,113 13,789 17,182 15,453

Education facilities 3

Schools……………………………………………………… 3,261 3,609 3,880 4,092 4,375 4,294

Post-secondary institutions………………………………… 1,336 1,369 1,383 1,425 1,637 1,499

4,597 4,978 5,263 5,517 6,012 5,793

Health facilities 3……………………………………………… 1,282 1,451 1,780 1,920 2,199 2,004

Highways, ferries and public transit

BC Transportation Financing Authority…………………… 1,433 1,843 2,197 2,514 2,743 2,661

BC Ferries…………………………………………………… 973 24 2 21 19 72 -

BC Transit…………………………………………………… 59 79 75 79 94 87

Public transit 3……………………………………………… 987 952 948 936 937 930

SkyTrain extension 3……………………………………… 133 488 836 1,044 1,214 1,105

Rapid Transit Project 2000 Ltd…………………………… 56 101 114 47 - 3

3,641 3,487 4,191 4,639 5,060 4,786

Other

BC Buildings………………………………………………… 715 615 610 596 538 456

552513 British Columbia Ltd. (Skeena Cellulose Inc.) 4… - - 337 - - -

Social housing 5…………………………………………… 183 205 265 299 218 161

Homeowner Protection Office……………………………… 11 34 71 113 139 123

Universities and colleges - fiscal agency loans………… 137 130 124 114 113 105

Student assistance loans………………………………… 287 267 159 90 73 54

Other 6………………………………………………………… 134 155 85 100 67 125

1,467 1,406 1,651 1,312 1,148 1,024

Total taxpayer-supported debt……………………….…… 23,204 25,181 24,998 27,177 31,601 29,060

Self-supported debt

Commercial Crown corporations and agencies

BC Hydro…………………………………………………… 7,474 6,945 6,852 6,863 7,442 6,829

BC Rail……………………………………………………… 607 655 603 614 638 494

552513 British Columbia Ltd. (Skeena Cellulose Inc.) 4… 221 280 - - - -

Columbia Basin Power Company 7……………………… 94 94 93 120 285 118

Columbia Power Corporation……………………………… - - 20 64 - 47

Liquor Distribution Branch………………………………… 3 3 2 13 12 9

8,399 7,977 7,570 7,674 8,377 7,497

Warehouse borrowing program……………………………… 658 1,320 1,312 1,067 - -

Total self-supported debt…………………………………… 9,057 9,297 8,882 8,741 8,377 7,497

Forecast allowance…………………………………………… - - - - 750 -

Total provincial debt………………………………………… 32,261 34,478 33,880 35,918 40,728 36,557

1Debt is after deduction of sinking funds and unamortized discounts, and excludes accrued interest. Government direct and fiscal agency

accrued interest is reported in the government's accounts as an accounts payable.2

Effective March 31, 2000, the provincial government assumed responsibility for the fiscal agency loans of BC Ferries ($1,080 million)

and 580440 British Columbia Ltd. (Vancouver Trade and Convention Centre) ($70 million). Although this resulted

in a change to debt composition, debt totals were not affected.3

Represents government direct debt incurred for capital financing purposes.4

Based on a revised outlook for world pulp prices and its potential impact on the finances of 552513 British Columbia Ltd. (Skeena Cellulose Inc.), the

company's debt was reclassified from self-supported to taxpayer-supported in 2000/01. In March 2002, the company's debt was assumed by the

provincial government ($260 million) and by the minority shareholder ($94 million) in preparation for returning Skeena Cellulose Inc. to the private sector.5

Includes the BC Housing Management Commission and the Provincial Rental Housing Corporation.6

Includes the BC Assessment Authority, the Pacific Racing Association, and other taxpayer-supported Crown corporations and

agencies. Also includes loan guarantees to agricultural producers, guarantees issued under economic development assistance programs

and loan guarantee provisions.7

A joint venture of the Columbia Power Corporation and Columbia Basin Trust.



Table A2.20 Five-Year Provincial Debt Summary -- Supplementary Information

1998/99 1999/2000 2000/01 2001/02 2002/03

Per Cent of GDP: (per cent)


Provincial government direct……………………………… 10.6 11.5 9.4 10.5 11.5Education…………………………………………………… 4.0 4.1 4.1 4.2 4.3Health facilities…………………………………………….. 1.1 1.2 1.4 1.5 1.5Highways, ferries and public transit…………………….. 3.1 2.9 3.2 3.5 3.6Other debt…………………………………………………… 1.3 1.2 1.3 1.0 0.8

Total taxpayer-supported debt………………………… 20.1 20.9 19.3 20.8 21.6

Self-supported debt

Commercial Crown corporations and agencies………. 7.3 6.6 5.9 5.9 5.6Warehouse borrowing program…………………………. 0.6 1.1 1.0 0.8 -

Total self-supported debt………………………………. 7.8 7.7 6.9 6.7 5.6

Total provincial debt……………………………………… 27.9 28.6 26.2 27.4 27.2



Provincial government direct……………………………… 10.8 13.4 -12.6 13.8 12.1Education…………………………………………………… 8.7 8.3 5.7 4.8 5.0Health facilities…………………………………………….. -10.4 13.2 22.7 7.9 4.4Highways, ferries and public transit…………………….. 15.8 -4.2 20.2 10.7 3.2Other debt…………………………………………………… 1.9 -4.2 17.4 -20.5 -22.0

Total taxpayer-supported debt………………………… 9.1 8.5 -0.7 8.7 6.9

Self-supported debt

Commercial Crown corporations and agencies………. 5.0 -5.0 -5.1 1.4 -2.3Warehouse borrowing program…………………………. 558.0 100.6 -0.6 -18.7 -100.0

Total self-supported debt………………………………. 11.9 2.6 -4.5 -1.6 -14.2Total provincial debt……………………………………… 9.8 6.9 -1.7 6.0 1.8

Per Capita Debt: (dollars)


Provincial government direct……………………………… 3,056 3,440 2,983 3,362 3,731Education…………………………………………………… 1,150 1,236 1,296 1,345 1,399Health facilities…………………………………………….. 321 360 438 468 484Highways, ferries and public transit…………………….. 911 866 1,032 1,131 1,156

Other debt…………………………………………………… 367 349 407 320 247 Total taxpayer-supported debt………………………… 5,805 6,251 6,157 6,626 7,017

Self-supported debt

Commercial Crown corporations and agencies………. 2,101 1,980 1,864 1,871 1,810

Warehouse borrowing program…………………………. 165 328 323 260 - Total self-supported debt………………………………. 2,266 2,308 2,188 2,131 1,810

Total provincial debt……………………………………… 8,071 8,559 8,345 8,757 8,827

Note: Totals may not add due to rounding.



Table A2.21 Summary of Changes from the 2002/03

Third Quarterly Report Updated Forecast - Capital Spending and Debt

Final

Change Results

($ millions)

Capital spending - third quarter updated forecast 2,179

Taxpayer-supported

Education facilities……………………………………………………………………………………… (19)

Health facilities…………………………………………………………………………………………… (17)

Rapid Transit Project 2000……………………………………………………………………………… (29)

Purchase of land for Vancouver Convention and Exhibition Centre expansion project………… 32

Other ……………………………………………………………………………………………………… (17) (50)


Columbia power projects……………………………………………………………………………… (40)

ICBC……………………………………………………………………………………………………… (15)

Other……………………………………………………………………………………………………… (18) (73)

Capital spending - actual…………………………………………………………………………………… 2,056

Provincial debt at March 31, 2003 - third quarter updated forecast 37,268


Provincial government operating - improved results of the CRF, partially offset by

higher working capital requirements……………………………………………………………… (111)

Education and health facilities - mainly reduced capital spending……………………………..… (38)

Transportation - mainly reduced SkyTrain capital spending……………………………………… (45)

Other reduced requirements…………………………………………………………………………… (27)

Total taxpayer-supported……………………………………………………………………………… (221)


BC Hydro - reduced working capital requirements…………………………………………………… (169)

Other - mainly Columbia power projects reduced capital spending ……………………………… (21)

Total self-supported……………………………………………………………………………………… (190)

Debt forecast allowance not needed…………………………………………………………………… (300)

Provincial debt at March 31, 2003 - 2002/03 Public Accounts ……………………………………… 36,557



Table A2.22 Historical Summary Accounts Surplus (Deficit) 1

Crown Summary SurplusConsolidated Revenue Fund Corporations Joint Accounts (Deficit)

and Trusteeship Surplus as a Per CentYear Revenue Expenditure Balance Agencies Arrangements (Deficit) of GDP

($ millions)

1969/70 ……………………… 1,248 1,244 4 - - 4 -

1970/71 ……………………… 1,373 1,274 99 - - 99 1.1

1971/72 ……………………… 1,558 1,474 84 - - 84 0.8

1972/73 ……………………… 1,772 1,675 97 - - 97 0.8

1973/74 ……………………… 2,217 2,071 146 - - 146 1.0

1974/75 ……………………… 2,769 2,779 (10) - - (10) (0.1)

1975/76 ……………………… 3,124 3,534 (410) - - (410) (2.1)

1976/77 ……………………… 3,785 3,691 94 - - 94 0.4

1977/78 ……………………… 4,372 4,168 204 - - 204 0.8

1978/79 ……………………… 4,853 4,582 271 - - 271 0.9 1979/80 1……………………… 5,860 5,318 542 (88) - 454 1.4

1980/81 ……………………… 5,982 6,239 (257) 45 - (212) (0.6)

1981/82 ……………………… 7,139 7,323 (184) 43 - (141) (0.3)

1982/83 ……………………… 7,678 8,662 (984) (257) - (1,241) (2.8)

1983/84 ……………………… 8,335 9,347 (1,012) 49 - (963) (2.0)

1984/85 ……………………… 8,807 9,801 (994) 172 - (822) (1.6)

1985/86 ……………………… 9,160 10,127 (967) 110 - (857) (1.6)

1986/87 ……………………… 9,463 10,624 (1,161) 526 - (635) (1.1)

1987/88 ……………………… 11,007 11,055 (48) 119 - 71 0.1

1988/89 ……………………… 12,570 11,834 736 194 - 930 1.3

1989/90 ……………………… 13,656 13,200 456 40 - 496 0.7

1990/91 ……………………… 14,236 15,010 (774) 107 - (667) (0.8)

1991/92 ……………………… 14,570 17,101 (2,531) 192 - (2,339) (2.9)

1992/93 ……………………… 16,172 17,858 (1,686) 210 - (1,476) (1.7)

1993/94 ……………………… 17,923 18,833 (910) 11 - (899) (1.0)

1994/95 ……………………… 19,506 19,953 (447) 219 - (228) (0.2)

1995/96 ……………………… 19,698 20,054 (356) 38 - (318) (0.3)

1996/97 ……………………… 20,126 20,241 (115) (270) - (385) (0.4)

1997/98 ……………………… 20,216 20,135 81 (248) - (167) (0.1)

1998/99 ……………………… 20,306 20,581 (275) (722) - (997) (0.9)

1999/2000 …………………… 21,957 22,213 (256) 406 - 150 0.1

2000/01 ……………………… 24,013 22,460 1,553 (70) (52) 1,431 1.1

2001/02 ……………………… 22,894 24,897 (2,003) 2 (746) 2 1,464 (1,285) (1.0)

2002/03 ……………………… 22,147 25,196 (3,049) (120) - (3,169) (2.4)

1 The provincial government began publishing summary financial statements in 1979/80. Figures for prior years are unavailable.

For 1970/71 to 1978/79, the CRF surplus/(deficit) is used in place of the summmary accounts surplus/(deficit). 2 Does not include the $256 million transfer to the CRF for the wind-up of Forest Renewal BC and Fisheries Renewal BC.



Table A2.23 Historical Revenue by Source


Contributions Contributions

from from

Natural Other Government the Federal

Year Taxation Resource Revenue Enterprises Government Total

($ millions)

1984/85....................... 5,015 721 886 360 1,825 8,807

1985/86....................... 5,237 704 965 398 1,856 9,160

1986/87....................... 5,354 658 979 448 2,024 9,463

1987/88....................... 6,200 1,223 1,060 470 2,054 11,007

1988/89....................... 6,973 1,272 1,729 447 2,149 12,570

1989/90 2..................... 8,095 1,249 1,464 727 2,121 13,656

1990/91....................... 8,702 1,171 1,433 834 2,096 14,236

1991/92....................... 8,997 1,101 1,573 701 2,198 14,570

1992/93....................... 9,897 1,264 1,580 1,016 2,415 16,172

1993/94 3..................... 11,101 1,772 1,733 1,048 2,269 17,923

1994/95....................... 11,937 2,244 1,835 1,028 2,462 19,506

1995/96 4..................... 12,509 2,026 1,801 968 2,394 19,698

1996/97....................... 13,094 2,186 1,743 1,148 1,955 20,126

1997/98 ...................... 13,103 2,197 1,799 1,280 1,837 20,216

1998/99 ...................... 13,134 1,829 1,831 1,362 2,150 20,306

1999/2000 5................. 13,364 2,517 1,888 1,454 2,734 21,957

2000/01 ...................... 13,881 3,975 1,860 1,500 2,797 24,013

2001/02 5 .................... 13,652 3,108 1,910 1,437 2,787 22,894

2002/03 5 ……………… 11,846 3,255 2,206 1,517 3,323 22,147

1 Revenue has been restated to reflect the government's accounting policy at March 31, 2003. Further information is provided in

footnotes to Table A2.3, and in the introduction to this appendix. Figures exclude dedicated revenue collected on behalf of, and

transferred to, Crown corporations and agencies. These revenues are included as part of the operations of the Crown corporations

and agencies. Figures are based on Public Accounts information.2 Beginning in 1989/90, other revenue has been restated to reflect a change in accounting policy to exclude sinking fund

earnings from revenue. 3 Beginning in 1993/94, revenue has been restated to reflect a change in accounting policy to show allowances for

doubtful collection of revenue accounts as deductions from revenue. Previously, these amounts were recorded as expenditures.4 Beginning in 1995/96, other revenue has been restated to reflect a change in accounting policy to exclude from

revenue and expenditure, non-cash exchanges of Crown land (of equivalent value) to third parties.5 Revenue have been restated for 1999/00 and 2001/02 reflecting a change in the method of recording equilization entitlement from

cash basis to accural. This has the effect of increasing 1999/00 revenue by $125 million, and reducing 2001/02 and 2002/03

revenue by $68 million and $57 million, respectively.



Table A2.24 Historical Expense by Function Consolidated Revenue Fund 1

Social Debt

Year Health Services Education Transportation Servicing Other2

Total

($ millions)

1984/85........................... 3,042 1,266 2,455 1,263 275 1,500 9,801

1985/86........................... 3,161 1,298 2,385 1,157 342 1,784 10,127

1986/87........................... 3,446 1,298 2,495 905 384 2,096 10,624

1987/88........................... 3,684 1,349 2,663 928 525 1,906 11,055

1988/89........................... 4,012 1,440 2,920 844 530 2,088 11,834

1989/90 3......................... 4,502 1,496 3,228 1,199 457 2,318 13,200

1990/91........................... 5,028 1,669 4,113 4 1,188 478 2,534 15,010

1991/92........................... 5,617 1,994 4,521 1,262 590 3,117 17,101

1992/93........................... 6,003 2,366 4,804 1,078 5 736 2,871 17,858

1993/94........................... 6,287 2,704 4,984 1,024 5 844 2,990 18,833

1994/95........................... 6,584 2,890 5,252 907 931 3,389 19,953

1995/96........................... 6,778 3,033 5,492 852 887 3,012 20,054

1996/97 .......................... 7,038 2,969 5,750 844 867 2,773 20,241

1997/98 .......................... 7,224 3,048 5,766 770 834 2,493 20,135

1998/99 6 ........................ 7,479 3,113 5,825 790 838 2,536 20,581

1999/2000 ...................... 8,017 3,093 5,975 1,697 835 2,596 22,213

2000/01 .......................... 8,745 3,208 6,357 611 889 2,650 22,460

2001/02 7 ........................ 9,846 3,381 6,854 701 761 3,354 24,897

2002/03 7 ........................ 10,357 3,090 6,877 750 711 3,411 25,196

1Expense has been restated to reflect the government's accounting policy at March 31, 2003. Further information is

provided in footnotes to Table A2.8. Figures are based on Public Accounts information.2

Other includes: protection of persons and property, natural resources and economic development, general government

and other expenses.3

Beginning in 1989/90, expense has been restated to report sinking fund earnings as a deduction from expense.

Previously, these earnings were reported as revenue. The annual deficits are unchanged by this accounting policy

change.4

Beginning in 1990/91, the provincial government assumed full responsibility for contributions to school districts previously

funded through residential school property taxes. As a result, some expenses formerly financed by local school

districts are included as expenses of the government.5

Responsibility for highway capital construction was transferred to the BC Transportation Financing Authority in 1993/94.6

Expense for prior years was decreased due to a change in recognition of silviculture liabilities arising under the Small Business

Forest Enterprise Program. Silviculture costs were previously expensed as incurred but are now accrued when the liability

occurs. Expense was reduced by $16 million-2001/02, $4.5 million-2000/01, $2.2 million-1999/00, and $5.9 million-1998/99.7

Includes restructuring exit costs (2002/03 - $188 million, 2001/02 - $161 million).



Table A2.25 Historical Provincial Debt Summary 1

Taxpayer-Supported Debt Total Taxpayer-

Provincial Education Health Total Debt Supported

Government Facilities Facilities Highways, Taxpayer- Self- Total as a Debt as a

Direct Capital Capital Ferries and Supported Supported Provincial Per Cent Per Cent

Year Operating Financing Financing Public Transit Other2

Debt Debt3

Debt of GDP of GDP

(millions) (per cent)

1969/70 ……… - 338 42 142 100 622 1,661 2,283 24.7 6.7

1970/71 ……… - 362 64 172 99 697 1,808 2,505 25.6 7.1

1971/72 ……… - 380 85 233 95 793 1,948 2,741 24.9 7.2

1972/73 ……… - 408 105 288 87 888 2,062 2,950 23.8 7.2

1973/74 ……… - 425 117 340 145 1,027 2,228 3,255 21.1 6.7

1974/75 ……… - 485 133 386 149 1,153 2,650 3,803 21.3 6.5

1975/76 ……… - 557 178 544 145 1,424 3,144 4,568 23.1 7.2

1976/77 ……… 261 658 236 649 188 1,992 3,787 5,779 24.4 8.4

1977/78 ……… 261 710 291 656 215 2,133 4,464 6,597 24.9 8.1

1978/79 ……… 261 778 334 653 91 2,117 4,838 6,955 23.3 7.1

1979/80 ……… 235 836 401 730 195 2,397 5,704 8,101 23.3 6.9

1980/81 ……… 209 919 461 729 270 2,588 5,956 8,544 21.6 6.5

1981/82 ……… 183 1,067 561 844 291 2,946 7,227 10,173 22.7 6.6

1982/83 ……… 883 1,204 660 1,024 894 4,665 7,692 12,357 27.4 10.4

1983/84 ……… 1,596 1,321 712 1,392 1,174 6,195 8,440 14,635 30.8 13.0

1984/85 ……… 2,476 1,308 717 691 4 1,276 6,468 9,082 4 15,550 31.2 13.0

1985/86 ……… 3,197 1,276 680 1,034 1,376 7,563 8,990 16,553 30.9 14.1

1986/87 ……… 4,802 1,268 681 1,097 812 8,660 8,485 17,145 30.3 15.3

1987/88 ……… 5,017 1,278 716 1,192 660 8,863 8,149 17,012 27.2 14.2

1988/89 ……… 4,919 1,322 763 1,213 842 9,059 7,396 16,455 23.7 13.1

1989/90 ……… 4,209 1,367 837 1,244 1,262 8,919 7,340 16,259 21.5 11.8

1990/91 ……… 4,726 1,565 959 1,287 1,281 9,818 7,444 17,262 21.8 12.4

1991/92 ……… 6,611 1,939 1,040 1,527 1,431 12,548 7,493 20,041 24.5 15.3

1992/93 ……… 8,969 2,426 1,141 1,719 1,641 15,896 7,526 23,422 26.8 18.2

1993/94 ……… 10,257 5 3,054 1,181 1,862 5 1,627 17,981 7,946 25,927 27.6 19.1

1994/95 ……… 10,181 3,631 1,318 2,158 1,749 19,037 8,013 27,050 26.9 18.9

1995/96 ……… 10,237 3,990 1,399 2,598 1,695 19,919 8,847 28,766 27.2 18.9

1996/97 ……… 11,030 4,230 1,431 3,144 1,440 21,275 8,096 29,371 27.0 19.5

1997/98 ……… 11,488 4,352 1,417 3,463 1,431 22,151 8,204 30,355 26.5 19.4

1998/99 ……… 12,217 4,597 1,282 3,641 1,467 23,204 9,057 32,261 27.9 20.1

1999/2000 …… 13,859 6 4,978 1,451 3,487 6 1,406 6 25,181 9,297 34,478 28.6 20.9

2000/01 ……… 12,113 5,263 1,780 4,191 1,651 7 24,998 8,882 7 33,880 26.2 19.3

2001/02 ……… 13,789 8 5,517 1,920 4,639 1,312 8 27,177 8,741 35,918 27.4 20.8

2002/03 ……… 15,453 5,793 2,004 4,786 1,024 29,060 7,497 36,557 27.2 21.6

1Debt is after deduction of sinking funds and unamortized discounts, and excludes accrued interest. Government direct and fiscal agency accrued interest

is reported in the government's accounts as an accounts payable.2

Includes BC Buildings, BC Housing Management Commission, Provincial Rental Housing Corporation and other taxpayer-supported Crown corporations

and agencies. Also includes loan guarantees to agricultural producers, guarantees issued under economic development assistance programs

and loan guarantee provisions.3

Includes commercial Crown corporations and agencies and, beginning in 1995/96, funds held under the province's warehouse borrowing program.4

Prior to 1984/85 debt outstanding for BC Rail was classified as taxpayer-supported debt. Beginning in 1984/85 the company was considered to be

a commercial operation.5

Prior to the establishment of the BC Transportation Financing Authority in the spring of 1993, capital financing for highways was provided through

provincial government direct operating debt.6

Effective March 31, 2000, the provincial government assumed responsibility for fiscal agency loans of BC Ferries ($1,080 million) and

580440 British Columbia Ltd. (Vancouver Trade and Convention Centre) ($70 million).7

Based on a revised outlook for world pulp prices and its potential impact on the finances of 552513 British Columbia Ltd. (Skeena Cellulose Inc.),

the company's debt was reclassified from self-supported to taxpayer-supported in 2000/01. As the province is not the sole shareholder of

Skeena Cellulose Inc., a portion of this debt was attributed to the minority shareholder.8

In March 2002, Skeena Cellulose debt was assumed by the provincial government ($260 million) and by the minority shareholder ($94 million)

in preparation for returning Skeena Cellulose Inc. to the private sector.



Table A2.26 Provincial Taxes (as of July 2003)

Type and

Statute Reference Tax Base Tax Rate Characteristics and Exemptions

Income —

Income Tax Act

Taxable Income

(1) Corporate.

(2) Personal.

13.5% of taxable income

(small business rate: 4.5%).

Tax rates of 6.05%, 9.15%,

11.7%, 13.7% and 14.7%

corresponding to tax brackets

of up to $31,653, $31,653to

$63,308, $63,308 to $72,685,

$72,685 to $88,260 and over

$88,260.

Both personal and corporate taxes are administered by the

Canada Customs and Revenue Agency under an

agreement between the province and the federal

government.

Corporate tax credits include the scientific research and

experimental development tax credit, book publishing tax

credit and the film tax credit. In addition, the political

contributions tax credit, royalty tax credit, the mining

exploration tax credit, logging tax credit and venture

capital tax credits are available to both individuals and

corporations.

Under the tax on income system, BC provides a set of

non-refundable credits equivalent to all federal non-

refundable credits.

BC Family Bonus and BC Earned Income Benefit are

combined with the federal government’s Canada Child

Tax Benefit in a single monthly payment to families. Tax

credits for claims against personal income taxes include

the refundable sales tax credit, mining flow-through share

tax credit and employee venture capital tax credits.

Capital —

Corporation

Capital Tax Act

Net BC paid-up capital. Banks, trust companies and

credit unions with net paid-up

capital: greater than $1

billion — 3%; $1 billion or

less or headquartered in

British Columbia 1%.

Associated groups of corporations with net paid-up

capital of less than $10 million are exempt from the tax.

Family farm, cooperative, non-profit and other specified

corporations are also exempt. The tax rate is phased in for

corporations with net British Columbia paid-up capital

between $10 million and $10.25 million. There is a

special flat fee for corporations above the exemption

threshold but with net paid-up capital allocated to British

Columbia below the threshold.

Real Property

Transfers —

Property

Transfer Tax Act

Fair market value of property

or interest in property

transferred.

1% on the first $200,000 of

value transferred and 2% on

amounts in excess of

$200,000.

Exemptions include: transfers of principal residences,

recreational residences and family farms to related

individuals; transfers of property between spouses

pursuant to written separation agreements or court orders;

transfers of property to local governments, registered

charities and educational institutions; transfers of property

to veterans under the Veterans' Land Act (Canada);

transfers of land to be protected, preserved, conserved or

kept in a natural state; and transfers of leases less than 31

years in duration. A number of technical exemptions are

also provided. Eligible first time home-buyers are exempt

from tax on transfers of eligible properties.

Retail Sales —

Social Service

Tax Act

Purchase and lease price of

tangible personal property,

repair labour and legal

services.

General rate is 7.5%.

Liquor 10%.

Passenger vehicles:

under $47,000 — 7.5%;

$47,000 to $48,000 — 8%;

$48,000 to $49,000 — 9%;

over $49,000 — 10%.

Collected through vendors and lessors registered under

the act and paid by purchasers and lessees. The

exemptions generally fall into four categories: (1) items

considered to be basic necessities of life such as food and

prescription and non-prescription drugs; (2) specified

inputs for certain sectors to enhance competitiveness such

as the exemption for machinery and equipment used in

manufacturing and in the natural resource industries and

the exemption of specified equipment used by bona fide

farmers, fishers and aquaculturists; (3) safety-related

equipment designed to be worn by a worker, such as high-

visibility vests and steel-toed boots, and specified general

safety equipment such as life jackets;

(4) energy conservation materials and equipment such as

insulation material for buildings, and eligible wind, solar

and micro-hydro equipment.

Accommodation

— Hotel Room

Tax Act

Purchase price of

accommodation.

8%. Eligible local

governments may apply to

have the province levy an

additional tax of up to 2% in

specified areas on their

behalf.

Exemptions include accommodation rented for a period in

excess of two months; lodging provided in hospitals and

nursing homes; lodging supplied to employees by

employers; lodging on ships or trains; hotel rooms not

used for accommodation; charges of $20 or less per day;

charitable institutions; trailer parks and campsites; cabins

without utilities and other amenities; and establishments

with accommodation for less than four tenants



Table A2.26 Provincial Taxes (as of July 2003) — Continued

Tobacco —

Tobacco Tax Act

By cigarette, cigar retail price,

and weight on other tobacco

products.

16 cents per cigarette and

tobacco stick; 77% of retail

price on cigars to a maximum

tax of $5 per cigar; 16 cents

per gram of loose tobacco.

Motor Fuel —

Motor Fuel Tax

Act

Tax generally applies to all fuels used in internal

combustion engines. Qualifying persons with disabilities

who own or lease a vehicle are entitled to refunds of

provincial tax paid up to an annual maximum of $400. In

the Vancouver Regional Transit service area the province

collects an additional 6 cents per litre tax on clear

gasoline and motive fuel on behalf of Translink to help

fund regional public and private transportation system

costs. In the Victoria Regional Transit service area the

province collects (collected on behalf of) an additional 2.5

cents per litre on behalf of BC Transit to help fund the

public transit system.

Clear gasoline (unleaded

gasoline only).

14.5 cents per litre. Includes

6.75 cents per litre collected

on behalf of the BC

Transportation Financing

Authority. Of the tax

collected in the Greater

Vancouver Regional District,

5.5 cents is collected on

behalf of TransLink.

Motive fuel. 15.0 cents per litre. Includes

3.25 cents per litre collected

on behalf of the BC

Transportation Financing

Authority. Of the tax

collected in the Greater

Vancouver Regional District,

5.5 cents is collected on

behalf of TransLink.

Tax applies to any fuel except unleaded gasoline, gasohol,

natural gas, propane and butane used in a motor vehicle.

Refunds of 0.5 cents per litre are available for motive fuel

used in private passenger vehicles.

Alternative Fuels. Propane 2.7 cents per litre. Natural gas, 85% ethanol and methanol blends are exempt

from tax.

Fuels using PuriNOx additive technology to blend at least

15% water and diesel motor fuel is also exempt from

taxation until July 31, 2004.

Coloured fuel, marine diesel

fuel.

3 cents per litre. Coloured fuel may only be used for specified primary

production and industrial uses. Bona fide farmers are

exempt from paying the tax when fuel is used for farming

purposes.

Locomotive fuel. 3 cents per litre. Tax applies to fuel specifically for use in locomotives.

Jet and aviation fuel. 2 cents per litre. Jet fuel tax applies to fuel produced specifically for use in

a turbine aircraft engine.

Aviation fuel tax applies to fuel produced specifically for

use in a non-turbine aircraft engine.

Natural gas used in stationary

engines.

7% of price if purchased. 1.1

cents per 810.32 litres if used

but not purchased.

Tax applies to natural gas used in stationary engines other

than pipeline compressors.

Natural gas used in pipeline

compressors to transmit

marketable gas.

Natural gas used in pipeline

compressors to extract and

transmit raw gas from wells to

processing plants.

Natural gas used in

compressors to re-inject sour

gas into depleted wells.

1.9 cents per 810.32 litres.

Exempt

Exempt.

Tax applies to natural gas used in a stationary engine at a

pipeline compressor station.

Marine bunker.

Marine gas oil.

Exempt

Exempt

Exemption applies to bunker fuel, or a combination of

bunker and other fuels used as fuel in a ship.

Exemption applies to marine gas oil when used in gas

turbine engines to propel passenger and cargo vessels.



Table A2.26 Provincial Taxes (as of July 2003) — Continued

Natural resources

— Logging Tax

Act

Net income from logging in BC 10% (fully recoverable

against federal and provincial

corporation and personal

income tax).

Net income from logging after deducting non-forestry

income and a processing allowance.

— Mineral Land

Tax Act

Assessed value of freehold

mineral land and production

areas.

Undesignated mineral land —

$1.25 to $4.94 per hectare.

Designated production areas

— $4.94 per hectare.

Rates of tax set on sliding scale, dependent on size and

designation of land.

—Mineral Tax

Act

Cash flow from individual

metal and coal mines (other

than placer gold mines).

Volume of production of

limestone, dolomite, marble,

shale, clay, volcanic ash,

diatomaceous earth, sandstone,

quartzite and dimension stone.

Value of minerals sold by

placer gold mines.

2% of net current proceeds

(NCP). 13% of net revenue

(NR).

$0.15 per tonne removed

from all quarries operated.

0.5% of value of minerals

sold.

Tax calculated on a mine-by-mine basis. NCP tax paid on

current operating cash flow until all current and capital

costs, plus any investment allowance, are recovered. NR

tax paid thereafter on cumulative cash flow. NCP tax

creditable against NR tax.

An operator may deduct 25,000 tonnes from the total

number of tonnes removed from all quarries operated by

that operator. However the amount deducted from any

one quarry by all operators of that quarry must not exceed

25,000 tonnes.

Insurance —

Insurance

Premium Tax Act

Direct premiums written. 4% for vehicle and general

insurance; 2% for life,

sickness, personal accident

and loss of salary and wages

insurance.

Exemptions — benefit societies; mutual corporations with

50% of income from farm or 100% from religious,

educational or charitable institutions; marine, except

pleasure craft; approved medical or hospitalization plans.

Real property —

Taxation (Rural

Area) Act

Assessed value of land and

improvements in rural areas

(outside municipalities).

Assessment determined under

the Assessment Act.

Rates are set annually. For

residential properties the rates

are set to increase average

residential rural taxes by the

rate of inflation. For 2003,

the rates are 0.05% for farms

and managed forest land;

0.103% for residential; 0.17%

for recreational property/non-

profit organizations; 0.37%

for light industry, business

and other property not

contained in any other class;

0.42% for utilities; 0.45% for

major industry and

unmanaged forest land.

Some exemptions apply under various statutes.

Residential

school tax —

School Act

Assessed value of residential

land and improvements.

Assessment determined under

the Assessment Act.

Rates are set annually to

increase average gross

residential taxes by the rate of

inflation. The rates vary by

school district. For 2003

rates range from about 0.24%

to 0.9%; weighted average

0.35%.

Basic rates are calculated using a formula to moderate

effects of varying average assessments on school district

taxes. School districts may levy additional tax if

authorized by local referendum. Amendments to the

School Act in 2002 allow the Minister of Finance to apply

different tax rates within a school district. Tofino is the

only municipality with a rate that differs from the rest of

the school district

Non-residential

school tax —

School Act

Assessed value of non-

residential land and

improvements. Assessment

determined under the

Assessment Act.

Rates are set annually. For

2003 the rates are 0.45% for

recreational property/non-

profit organizations; 0.23%

for managed forest land;

0.68% for farms; 0.99% for

light industry, business and

other property not contained

in any other class; 1.2% for

unmanaged forest land;

1.25% for major industry;

1.5% for utilities.

Some exemptions apply under various statutes.



Table A2.27 Interprovincial Comparisons of Tax Rates - 2003

(Rates known as of June 30, 2003)1

Prince

British Saskat- New Nova Edward New-

Tax Columbia Alberta chewan Manitoba Ontario Quebec Brunswick Scotia Island foundland

Corporation income tax

(per cent of taxable income)2

General Rate………………… 13.5 12.5 17.0 16.0 12.5 8.9/16.25 13.0 16.0 16.0 14.0

Manufacturing Rate…………. 13.5 12.5 10.0 16.0 11.0 8.9 13.0 16.0 7.5 5.0

Small Business Rate………… 4.5 4.0 6.0 5.0 5.5 8.9 3.0 5.0 7.5 5.0

Small Business Threshold

($000s)………………..……… 300 400 300 320 320 n/a 400 200 200 200

Corporation Capital Tax (per cent)3

Non-financial…………………… Nil Nil 0.6 0.3/0.5 0.3 0.6 0.3 0.25/0.5 Nil Nil

Financial……………………..… 1.0/3.0 Nil 0.7/3.25 3.0 .6/.72/.9 1.2 3.0 3.0 3.0 4.0

Health Care Monthly Premiums

Individual/family4………………$54/$108 $44/$88 Nil Nil Nil Nil Nil Nil Nil Nil

Payroll tax5 (per cent)………….. Nil Nil Nil 2.15 1.95 4.26 Nil Nil Nil 2.0

Insurance premium tax

(per cent)6……………………. 2.0-4.0 2.0-3.0 3.0-4.0 2.0-3.0 2.0-3.5 2.0-3.0 2.0-3.0 3.0-4.0 3.5 4.0

Fuel tax (cents per litre)

Gasoline7……………………… 14.5 9.0 15.0 11.5 14.7 19.2 10.7 15.5 14.0 16.5

Diesel…………………..……… 15.0 9.0 15.0 10.9 14.3 20.2 13.7 15.4 13.5 16.5

Sales tax (per cent)8

General rate………………….… 7.5 Nil 6.0 7.0 8.0 7.5 8.0 8.0 10.0 8.0

Liquor………………………...… 10.0 Nil 7.0 7.0 12.0 7.5 8.0 8.0 37.5 8.0

Meals……………………….… Nil Nil Nil 7.0 8.0 7.5 8.0 8.0 10.0 8.0

Accommodation9……………… 8.0 5.0 6.0 7.0 5.0 7.5 8.0 8.0 10.0 8.0

Tobacco tax (dollars per

carton of 200 cigarettes)10…..… $32.00 $32.00 $35.80 $33.20 $17.20 $18.10 $29.00 $30.60 $29.90 $34.90

1 Personal income tax rates are not shown because they vary by income ranges determined by each province.2 Alberta, Manitoba, Ontario and New Brunswick plan further reductions in their corporate income tax rates or increases in their

small business thresholds in future years. Quebec's rate on investment income is 16.25 per cent.3 The lower British Columbia rate applies to financial corporations corporations with net paid-up capital in excess of $10 million.

Ontario has a deduction of $5 million for all corporations; Manitoba has a $5 million exemption level and the higher rate

applies to corporations with taxable capital in excess of $10 million; Saskatchewan has a $10 million deduction with an additional

$5 million available to Saskatchewan-based companies. Large Saskatchewan resource corporations are assessed a surcharge

on the value of Saskatchewan resource sales. Ontario and Quebec have an additional surcharge or compensation tax on

financial institutions. Ontario has announced it intends to phase out its capital tax starting in 2004.4 British Columbia has a two-person rate of $96 per month. British Columbia and Alberta offer premium assistance in the form of

lower rates or an exemption from premiums for lower-income individuals and families.5 Manitoba, Ontario and Newfoundland provide payroll tax relief for small businesses.6 The lower rate applies to premiums for life, sickness and accident insurance; the higher rate applies to premiums for property

insurance. The rate on automobile insurance is 4 per cent in British Columbia and Saskatchewan, and 3 per cent in Ontario.

Sales tax applies to insurance premiums, except those related to individual life and health, in Ontario (8 per cent),

Newfoundland (12 per cent) and Quebec (9 per cent). The sales tax is 5 per cent for auto insurance in Quebec and Ontario.7 Tax rate is for regular unleaded fuel used on highways. The British Columbia rate includes 3.25 cents per litre dedicated to the

BC Transportation Financing Authority, 1.25 cents per litre dedicated to the British Columbia Ferry Corporation andfive cents per litre dedicated to TransLink ,Vancouver's regional transportation authority. The rates do not include regional taxes.

The Quebec rate includes estimated sales tax.8 The Quebec and Prince Edward Island tax rates are imposed on top of the federal goods and services tax.9 The British Columbia rate includes 1.65 percentage points which are imposed on behalf of Tourism British Columbia.

10 Includes estimated provincial sales tax where applicable.



Table A2.28 Summary of Major Tax Changes Announced in 2003

Income Tax Act ¶ Enhanced regional incentives were added to the

corporate film tax credits.

¶ New digital animation or visual effects credits were introduced for film productions. A new book publishing tax credit was introduced effective October 1, 2002.

¶ The mining flow-through share tax credit was extended to match the extension of the federal credit.

¶ The BC Mining Exploration Tax Credit was extended for three more years to August 2006.

Corporation Capital Tax Act ¶ The corporation capital tax exemption threshold for

financial institutions was increased to $10 million from $5 million effective April 1, 2003.

Social Service Tax Act ¶ Effective February 19, 2003 the sales tax exemption for

machinery and equipment (M&E) used in manufacturing, logging, mining and the energy sector was extended to apply to contractors who purchase M&E under fixed-price contracts to improve real property for eligible customers.

¶ Effective February 19, 2003, the exemption for machinery and equipment used in the forest industry was expanded to include boom boats.

¶ Effective February 19, 2003 the Act was amended to treat aggregate producers the same as mineral producers for provincial sales tax purposes. This allows aggregate producers to qualify for the exemption for purchases of explosive supplies.

¶ Effective February 19, 2003 the list of items that can be purchased exempt by bona fide farmers was expanded to include hanging gutters and shade curtains and the exemption for aquaculturists was expanded to include closed bag containment systems and water pumps used to fill or empty fish enclosures. Effective February 19, 2003 parts delivery vehicles used by motor vehicle dealers were made eligible to be taxed under the "dealer use formulas".

¶ Effective February 19, 2003, the Act was amended to clarify that agricultural feeds and seeds are taxable when used to feed wild birds, pet birds and other household pets.

School Act ¶ For 2003, the province announced a new policy that in

2003 and future years average gross residential school taxes would increase by the rate of inflation. In 2003 the increase is 2.5 per cent. As usual, the province adjusted school property tax rates in response to changes in average assessed values in each school district. Some homeowners will experience an increase in their school taxes that exceeds 2.5 per cent, while others will have offsetting reductions.

¶ For each of the eight non-residential property classes, a single, province-wide rate is set. Non-residential school tax rates are unchanged from last year. Individual property tax bills for non-residential property owners may rise or fall depending on changes in assessment.

Taxation (Rural Area) Act ¶ The province announced a new policy that in 2003 and

future years average gross residential rural area taxes would increase by the rate of inflation. In 2003 the increase is 2.5 per cent. The residential tax rate was reduced to 0.103 per cent. Assessments on existing properties, on average, were up 3.8 per cent. Non-residential rates were not changed from last year.

Motor Fuel Tax Act¶ Effective March 1, 2003 the tax rate on clear gasoline

and clear diesel fuel raised by the BC Transportation Financing Authority was increased by 3.5 cents per litre to 6.75 cents per litre. The tax rate for auto propane was increased to 2.7 cents per litre from 2.1 cents in order to maintain the 25 per cent relationship with clear gasoline.

¶ Effective April 1, 2003, the 1.25 cent per litre clear motor fuel tax formerly paid to the BC Ferry Corporation was redirected to the consolidated revenue fund.

¶ Effective February 19, 2003, a tax exemption was provided for marine gas oil when the fuel is used in gas turbine engines to propel passenger or cargo vessels.

¶ Effective April 1, 2003, the portion of tax on clear gasoline and diesel fuel transferred to TransLink was increased by 0.5 cents per litre.

Tobacco Tax Act ¶ As of February 19, 2003, the tax rate on cigarettes was

increased to $32 from $30 per carton of 200 cigarettes and the tax rate on fine-cut tobacco was increased to 16 cents from 15 cents per gram.

Horse Racing Tax Act ¶ The Act was repealed, effective April 1, 2003, and the

authority to collect revenue from wagering on horse racing was transferred to the BC Lottery Corporation.

Appendix 3 Constitutional Framework

90 Appendix 3 — Constitutional Framework


Constitutional Framework

The structure of the British Columbia government is based on British parliamentary tradition and precedent. Prior to 1866, BC was composed of two British-controlled Crown colonies, one on Vancouver Island and a second on the mainland. In 1866, the Union Proclamation joined these two colonies to form the Crown Colony of British Columbia, and on July 20, 1871, BC entered into Confederation with Canada. Although the Colony of Vancouver Island had a parliamentary form of government as far back as 1856, the fi rst fully elected government was not instituted in BC until the autumn after Confederation with Canada. Responsible government was achieved in late 1872, when the Lieutenant Governor acquiesced to an executive council that was responsible to the legislative assembly.

Upon entering Confederation, BC came under the authority of the British North America Act, 1867 (BNA Act), a statute of the British parliament. Until 1982, the BNA Act defi ned the major national institutions and established the division of authority between the federal and provincial governments. In 1982, the BNA Act was renamed the Constitution Act, 1867 and its amendments were incorporated into the Constitution Act, 1982. The Constitution Act, 1982, which also includes the Canadian Charter of Rights and Freedoms, is companion legislation to the Canada Act, 1982. With the passage of the Canada Act, 1982, the British Parliament ended its legal right to legislate for Canada. Canada, as a federal state, divides legislative powers between the federal and provincial governments.

Provincial Government

BC’s government is modeled after the British system. Functionally there are three main branches: the legislature, the executive and the judiciary.

Legislature

Legislative powers in British Columbia are exercised by a single legislative chamber, which is elected for a term of up to fi ve years. The legislature consists of the Lieutenant Governor and 79 elected members of the legislative assembly. The legislative assembly represents the people of BC in the conduct of the province’s affairs. The assembly is required by law to meet at least once a year with a normal session lasting several months. However, special sessions can last just a few days or many months, depending on the nature of the government’s business.

The Legislature operates on a fi xed schedule — the second Tuesday in February each year is reserved for the Throne Speech and the third Tuesday in February each year is reserved for the Budget Speech.

Executive

The executive is composed of the Lieutenant Governor and the executive council. The Lieutenant Governor is the Queen’s representative in British Columbia and holds a largely ceremonial place in modern provincial

Appendix 3 — Constitutional Framework 91


government. By constitutional custom, the Lieutenant Governor is appointed by the Governor General of Canada for a term usually lasting fi ve years.

The Lieutenant Governor, on the advice of the premier, appoints members of the executive council and is guided by the executive council’s advice as long as it holds the confi dence of the legislative assembly. Following a general election, the Lieutenant Governor calls upon the leader of the political party with the largest number of elected members to serve as premier and to form the provincial government.

The Lieutenant Governor, on recommendation of the premier, convenes, prorogues and dissolves the legislative assembly and gives Royal Assent to all measures and bills passed by the assembly before they become law.

The executive council, or cabinet, is headed by the premier and is composed of selected members of the ruling party. Ministers are the head of government ministries, and are usually members of cabinet.

Cabinet determines government policy and is held responsible by the legislative assembly for the operation of the provincial government. Deputy ministers are the chief operating offi cers of ministries and are appointed by cabinet. Deputy ministers are responsible for carrying out government policies and for managing the work of their ministries.

Judiciary

The judiciary performs functions that are central to the orderly operation of society. Judges hear and give judgment in criminal prosecutions and in actions arising from disputes between private citizens or between the government and private citizens. Judges apply both judge-made law, known as ‘‘common law,’’ and laws made by the Parliament of Canada and provincial legislatures. The judiciary is increasingly called on to determine whether laws passed by governments conform to the values expressed in the Canadian Charter of Rights and Freedoms.

BC’s judicial system is made up of the Provincial Court of British Columbia, the Supreme Court of British Columbia and the Court of Appeal of British Columbia. The Provincial Court includes Small Claims, Adult Criminal, Youth and Family divisions. The provincial government appoints Provincial Court judges, and the federal government appoints Court of Appeal and Supreme Court judges.

The federal judicial system includes the Tax Court of Canada, the Federal Court of Canada (Appeals division and Trial division) and the Supreme Court of Canada. The Federal Court of Canada hears cases in limited areas of exclusively federal jurisdiction, for example, reviewing decisions made by federal tribunals such as the Canada Labour Relations Board. The Supreme Court of Canada is the court of fi nal resort and hears selected appeals from the Federal Court of Appeal and provincial Courts of Appeal.

92 Appendix 3 — Constitutional Framework


Provincial Government Jurisdiction

Under Canada’s constitutional framework, BC has ownership and jurisdiction over natural resources and is responsible for education, health and social services, municipal institutions, property and civil rights, the administration of justice and other matters of purely provincial or local concern.

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